With the recent SBA 504 25-year fixed rates near historic lows (3.08% in April) along with allotted loan payments being covered by CARES Act stimulus payments, the 504 loan program has become a popular financing solution.
Each loan file brings unique challenges. The primary goal of the 504 loan program is to encourage economic development by enabling small businesses to create or retain jobs within their communities. The challenge, sometimes, with self storage is they create few, if any, jobs. When the job creation requirement is not met, the only way to qualify for a 504 loan is to meet one of a number of other Public Policy Goals that SBA has. A new construction self storage deal creates tax basis in the community which is a Public Policy goal and therefore makes the project eligible. However, for purchases or refinances of existing facilities, it can sometimes become more challenging to satisfy the requirement.
“For this particular deal, my 504 team and I put an emphasis on the fact that the storage facility was considered “rural” based on the population map used and also pointed out that the entity purchasing the site was female owned.”
After the bank approved a recent deal, we reached out to a CDC the bank is familiar with and addressed the jobs concern before sending the file to the SBA for processing. For this particular deal, my 504 team and I put an emphasis on the fact that the storage facility was considered “rural” based on the population map used and also pointed out that the entity purchasing the site was female owned. These factors allowed the facility to be eligible even though there were technically no new jobs created.
Being a top ten 504 lender in the nation and using the bank’s extensive knowledge of the approval process, we were able to insure a smooth loan transaction for both buyer and seller.
Nick Collins
Bank Five Nine
