Need a little cash infusion for your self-storage business?
Join the club. According to Chris Rentner, founder and CEO of Akouba Credit, small business loans for less than $250,000 are in demand, yet many banks shy away from them.
Furthermore, a recent survey from LendingTree found that nearly 60 percent of 170 surveyed small business owners didn’t shop around when it came to applying for loans, and only about 25 percent went online to research funding options.
How can you access the funding you need while being sure not to leave any money on the table? We asked experts for their top tips on how to make the loan shopping process easy—and to perhaps save you money along the way.
1. Start with a clear financial assessment.
New self-storage owners should expect to personally guarantee a loan, said Jay Michalowski, CEO of Marx Financial Corp.
Check your personal credit report (you can get one for free here) and make sure everything is accurate. If you happen to find any errors, such as incorrect debts or late payments, be sure to contact the credit bureaus to have these fixed before you go shopping for loans. Why? The better your credit, the better offers and lower rates you’ll receive.
2. Shop around.
“There are plenty of lenders out there, and there are funding comparison sites to help you see more clearly the right lender for you,” said David Kiriakidis, digital marketer for Fleximize, a website for small business loans. “Some lenders are just focused on numbers, whereas some are focused on helping you to grow your business and will support you and provide you with a dedicated relationship manager—something that can’t be underestimated.”
3. Look beyond the interest rate for a fair comparison.
When you’re shopping for loans, consider all the costs, such as interest rate; origination, application and late fees; and prepayment penalties, said Dee Power, author of “The Pocket Small Business Owner’s Guide to Business Plans.”
4. Check out the “little guys,” non-bank lenders and self-storage lenders.
In addition to checking out the rates with large national banks, “speak with a few community banks about your financing needs and what they are capable of lending to you,” Rentner said. “Sometimes the big banks will overlook your loan, but the small ones may be more willing to help.”
Several lenders concentrate on the self-storage market.
“Those who specialize in the self-storage industry know what is needed for a facility to be successful,” said Terry Campbell, self-storage domain expert at Live Oak Bank. “They know how the business works and what will make a facility good, which in turn makes [the self-storage owner] a good risk to loan money to.”
Campbell said lenders who know the self-storage industry offer other non-monetary benefits as well, such as product knowledge and business advice.
Plus, these loans can wind up being a great deal.
“We offer SBA [Small Business Administration] programs that allow borrowers to get a loan with much lower down payments and long repayment terms,” Campbell said. “Since we specialize in self-storage and in SBA loans, we are faster at it than the typical bank.”
Non-bank lenders might offer different loan options.
“Check if you can create a customized program with your lender,” said Sam Baitz, CEO of Shield Funding. “If you’re looking at non-bank lenders, you can be more flexible in figuring out a loan payment program that works well for you and your schedule.”
5. Use a mortgage broker.
Michalowski stresses the importance of setting reasonable expectations, and then using an experienced mortgage broker to find the right loan for you. Steer clear of paying up-front fees, he said.
6. Dot your I’s and cross your T’s.
It’s a simple thing, but make sure your loan application is complete.
“You’d be surprised at how many loans get turned down due to businesses not having the necessary documents ready or not full completing the application,” Kiriakidis said. “If in doubt, look to your preferred lender’s website or contact them to make sure you have everything you need to get funded.”
7. Build rapport with your lender.
“One of the strongest things you can do is build a positive relationship with your lender,” said Audrey Trinidad, founder and CEO of BioTechs, a provider of decontamination services. “Lenders are going to periodically check in to see how healthy the business is. This can be very beneficial because some lenders will have an on-hand financial adviser that can help navigate through any hiccups that may pop up down the line.”