From the outside looking in, the self storage business can often look intimidating. Especially in an economy where it's difficult for anyone to get a loan, particularly first time property owners.
However, there are steps that you can take to make getting into the self storage business easier and less stressful. First of all, it's important to understand why banks are so selective when it comes to self storage borrowing.
Not only is it a property loan, but the self storage industry is unique from most other property ownerships. In fact, it's more of a retail business meaning you not only have to known how to be a successful landlord, you have to know how to run a sustainable retail business. And if you have little or no experience in either field, banks and credit unions are often hesitant to cough up the loan.
How to Gain Credit
Before heading into the loan office, it's a good idea to build up your credit. Whether it be business or personal, having a good track record will only help your chances at getting approved.
If you're working under a company name, be sure to register with the three credit bureaus. It will put you on the map with creditors and allow banks to check your Small Business Credit Risk Score.
Another way to earn a high credit score is to open up a checking account or credit card in your business name. And if you're operating under your personal accounts, make sure your debts are paid up and any previous property loans are in order.
Next, get to work on your paperwork. Your loan application is one of the most important steps when purchasing your very own self storage facility. Make it shine by highlighting all of your assets. Have you owned property before? Worked in retail?
Show the bank your skills and why you'll be great in the self storage business. On the other hand, though, make sure the skills you're listing are worth bragging about. Selling retail in college for a few months isn't exactly going to impress a possible investor.
Finally, utilize your resources. Do you currently own properties? What collateral do you have to offer?Having a sufficient amount of insurance is sure to help any lender feel at ease when handing you a check.
Another helpful resource is hiring an experienced manager. Bringing in an employee who is well-versed in the business will prove to the bank or credit union you've done your research and are serious about the loan and the self storage industry.