The economy is constantly changing. With these changes, the financial market can fluctuate on an hourly basis. If you are looking to start up a new commercial storage business, making sure that you can get financing is likely a main concern. Because of the rise in foreclosures and bankrupt accounts, banks have placed very stringent credit guidelines on new accounts—especially commercial lending. While borrowing money to launch your storage business may be your only option, there are a few things to have in place before applying.
One of the most important ways to assure financing will be approved through your lender is to make sure you have a solid credit history. Your credit history is based on how well you paid your bills on time, how much debt you currently have and length of your credit history. If you have any blemishes on your credit report, it will reflect on your FICO or credit score. Your FICO score is determined by several factors, including all of the information on your credit report. The result is a number than lenders use to easily decide on your credit worthiness. If this number is low, you may not be able to obtain a loan. The goal is to keep the number high so you have the buying power to get the financing you need for your commercial storage units.
When it comes to getting financed and getting the best rates for your loan, sometimes a spotless credit report isn’t the only thing that lenders will look for. You will likely have to offer some sort of collateral to secure the loan. When the loan reaches the underwriting process—or the final step in approving the loan, collateral will be examined by several examiners. They want to make sure that with the collateral in place, they will get their money back should you default on the loan. Collateral includes business as well as personal assets that can be sold to help pay off outstanding debt or payments owed. Some examples of collateral that most lenders will accept include:• Heavy equipment at a 50 percent depreciation value
• Furniture at a 50 percent depreciation value
• Business receivables
• Stocks and bonds
• Certificates of deposit
• Home at 75 percent of the market value minus the mortgage balance
As part of the approval process, the bank will calculate a collateral coverage ratio to determine if you have sufficient collateral to match a percentage of the loan. If you are refinancing an existing business loan or you have another business with equity, you may be able to incorporate it as collateral when you apply. Collateral is something to consider before you start the application process.
Many lenders will take a close look at your current business practices if applicable as well as your business history. They may also do a general sales and growth analysis of other nearby storage unit competitors in the business. Be expected to provide past financial history reports as well as future profit projection moving forward. The bank will want to know that you have a back-up plan should your business lose profit or fail. They will also ask about business operating history, sales growth, future of the industry and if there is any discretionary cash flow.
Once you feel you meet all of the above criteria, you can submit your loan application to one or more banks or lenders. Be sure to shop around to find the best interest rate and flexible terms for your commercial storage business.
Call us at Find Local Storage for all of your storage needs.