By Bishesh Shrestha
Acquiring a storage facility, land or additional units is critical to the growth of your RV and boat storage facility. Fortunately, the SBA 7(a) loan program is an excellent funding source for deals up to $5 million. When approaching a lender, there is documentation they will expect when evaluating a loan request for a small business acquisition.
- Description of spending. Your lender will look for a detailed description of how you plan to spend or use the funds loaned to you. For example, if you are building a new facility or expanding, plan to outline projected costs for your architect and contractors and other planned expenditures. If you are purchasing a facility, include the real estate and the building’s purchase figures, staffing, technology investments and any additional transition costs. If necessary, include marketing funds and any working capital expenses needed as you get your business up and running.
- Current profit/loss statement and balance sheet dated within 90 days. How much cash did the facility generate last year, and how much is it generating today? What are your total monthly expenses, and have you spent too much on supplies that did not contribute to revenue? Answering these questions will allow you to track expenses and their return.
- Business tax returns. If you own other businesses, your lender will want to see three years of tax returns, an interim profit and loss statement, and a balance sheet on those businesses.
- Personal tax returns. Plan to provide your personal tax returns for the past three years. Your lender will use this information to verify your annual income.
- Personal financial statement. This statement shows a lender your income, the value of your assets (such as your home, vehicles and savings accounts), outstanding debts, some of your debt payments, and monthly overhead. This will give your lender a good idea of your personal cash flow and the amount of additional debt you can comfortably handle.
- Personal resume. Lenders also want to be confident in your ability to operate a business. Therefore, the objective of your resume is to show that you have the business, managerial or educational experience necessary to successfully manage your facility.
- Rent roll. For an existing facility, this is a detailed document of the total rent due by each tenant and the amount received to date. How many units are rented, and what is the cost of each of the units?
- Management reports. Pull your latest management reports to show payments, rent and fees, and any other key data that indicates the performance of an existing facility.
In addition to the above documentation, your lender will look at your credit (FICO) score to analyze your creditworthiness. FICO scores range from about 300 to 850, with the vast majority falling in the 600 to 700 range. For business loans, most lenders look for mid to high 600s scores. There are key factors influencing how past delinquencies determine your credit score. Examples include the following:
- Credit management (do you consistently max out your credit cards?)
- The age of your credit file
- Frequency of credit applications
- Credit mix
Before applying for your loan, check your FICO score to ensure all information is accurate and take the necessary steps to strengthen your financial profile.
In summary, having the proper documentation prepared beforehand will help streamline the conversation with your lender, aiding in the success of the loan. In addition, preparing in advance helps educate you on your potential purchase and business plan while showing the lender your dedication to your business.
Bishesh Shrestha was born and raised in Kathmandu, Nepal. After attending grade school in India, he was accepted to Miami University in Oxford, Ohio, where he earned a degree in foreign affairs. Bishesh later completed his master’s degree at Elon University earning an MBA. He joined Live Oak Bank in 2013. Bishesh started in the Business Advisory Group and was quickly promoted to an underwriter, then moving to an underwriter team lead for the healthcare vertical. As a loan officer, he is responsible for evaluating, structuring and packaging SBA loans for the industry. In his free time, Bishesh enjoys going to the beach with his wife and kids and cooking. To learn more and connect with a Live Oak Bank loan officer, visit www.liveoakbank.com/self-storage.
Learn more from Bishesh Shrestha at the Toy Storage Nation Executive Workshop, April 14, where he’ll be leading a presentation addressing the following hot topics in finance:
- How to get the money to keep the project moving forward.
- Does selecting a lender with RV & Boat Storage funding matter?
- Loan types to fit your needs.
To register for the event, visit https://toystoragenation.com/las-vegas-2023-event/