“If you are born without a lot of money, and you never borrow money and go in debt, you are going to die without a lot of money.”

A mentor told me that once.

He also said it is important to know the difference between good debt and bad debt.

Yes, there is such a thing as good debt.

Debt has a bad reputation in our society. I know there are a lot of reasons to be careful with debt. No one should live beyond their means.

But if you are in the self-storage business, debt is your friend.

And the beautiful thing about this type of debt is other people are paying it off for you.

Now I know it can bite you. You have got to be careful and reduce or minimize your risk by not being too overly leveraged (too high a loan on a facility), but without the ability to get a loan, most of us would never be in the self-storage business.

So can you get a loan?

The answer to that question is not hard to find out. Meet with a commercial loan officer and they can tell you within ten minutes.

If you are designing your business strategy, and you are not strong enough to get a loan, what will you do?

I found partners that were strong enough to get the loan. I gave them a percentage of the deal, did all the work, and told them for their willingness to take a risk and go on a loan with me, they will get ownership, cash flow, and wealth creation.

Then I showed them how much of each from the reports I generated. Not guaranteed, but based on the fact it was self-storage, highly likely. Later it was also based on my track record.

So the final piece of your self-storage business strategy is based around the loan. You want to put a loan strategy on that “covers your weakness” and optimizes your chances of being able to close on the project.

One very valid strategy today is an SBA loan for self-storage.

If you only have between 10% and 15% of the project sales price in cash, you can get a Small Business Administration (SBA) loan on the facility.

That is a government guaranteed business loan (guaranteed for the bank that is i.e. the SBA guarantees the bank a percentage of the loan in the event of a default on your part so the bank’s position is less risky in the deal).

These loans have a lot of benefits for a first time, or smaller investor:

1. Less cash requirements.
2. No balloon payments usually. These loans are self amortizing. In other words, it is like your house, a 20-year loan does not have to be refinanced for 20 years.
3. Longer amortization. Some can go up to 25 years.
   • Note: Amortizations have more to do with your payment than interest rates do. Instead of spending all your energy negotiating interest rates, put as much energy into negotiating amortization periods. This will effect the monthly payment more.

As with everything in life, there are also a few drawbacks, or things to take into consideration when contemplating an SBA Loan:

1. More cost. An SBA loan can be quite expensive with bank cost. Usually these can be rolled into the loan, but the cost is still there.
2. They can usually take longer to get approved and there is definitely more paperwork and hoops to jump through.

But for the benefits, I tend to think it would be worth it.

If you are starting out in the business, or think an SBA loan on your next facility would work for you, let me introduce you to someone. I don’t usually do this, but my research indicates to me that I would be doing you all a favor by making this introduction.

I have never worked with him personally, but have talked to people who have, and I think there are a lot of advantages.

Terry Campbell, of Live Oak Bank in Wilmington, North Carolina, is the go to person for SBA loans in the self-storage space. His bank will loan anywhere in the US on self-storage, and this is all they do. There is no education of the industry necessary (which I find I spend a lot of time doing).

Having a bank that follows you around is a big deal. Usually, banks only loan in their own footprint, and it is the larger banks that will even consider lending wherever you want to go. These banks are not the easiest to do business with I have found out. I like the relationships I have with the smaller banks, and to have one that will follow you the customer, is big, a game changer in my opinion.

I would like to have Terry host a webinar explaining SBA loans and their benefits in the world of self-storage if you think that would beneficial.

If you would like an introduction to Terry, click here and fill out the one page form, and get back to me as per instructions on the simple form.

YOUR BUSINESS STRATEGY IS EVERYTHING THESE DAYS.

It literally determines how successful you will be and creates the benchmarks for measurement.

Reach out if I can help.

Figure out what you need to do to gap any weakness you have in cash, loans, and management. What do you have to earn on the investment money and why are you in or getting in the self-storage business.

Answer these questions intelligently, and you are on your way to “Creating Wealth Through Self-Storage”.

Next week I will share our current strategy that we have found is working for us. By finding facilities that we can purchase in today’s highly priced market, and that allows us to generate the returns we need in order to pay our investors an 11% preferred return.

So to prepare for 2016. Finish your business strategy if you haven’t. Also answer the questions, where you want to own, why there, and what is your exit strategy.

REMEMBER NOTHING SET IS IN STONE.