All projects need a thorough business plan to entice the lender to provide financing. The self-storage industry, however, has one unique difference that may impede obtaining financing. Some financial institutions shy away from lending on a single-purpose facility, such as self-storage, due to limitations on the property use and obvious limitations to financial recovery if the entrepreneur fails.
In this article, we’ll examine the requirements of a good business plan, and the steps you’ll need to obtain financing for a self-storage facility.
Lenders expect a financing request package to have all information presented in a well-developed manner. A resume of the principals should include their business experience, net worth statements and past profit on other projects. This should also show their ability to provide an investment of 30 percent to 35 percent of the project cost. The entrepreneur needs to provide the project-cost projections and any licensing and permit requirements. Expect to show financial projections, a balance sheet, a projected profit-and-loss statement and a projected cash-flow forecast.
The plan should also have a list of professionals who will assist in the project including the architectural and engineering firms, accountants and general contractor. The final plan should show:
- Physical construction costs
- Fees and permits (sewer, water hook-up impost fees, building permits, etc.)
- Architect, legal and appraisal fees
- Interest and brokerage fees
- Contingency fees
- Construction contract and terms
- Flow charts for construction timeline and cash-flow statements
- Offers to purchase the property
- An income and expense statement detailing anticipated project activity and lease-up
- Phase One environmental reports, project feasibility studies and absorption analysis
- Recent appraisal