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Preparing a Self-Storage Loan-Request Package: Making Approval Easy for Your Lender

By Neal Gussis Comments
Continued from page 1

Don’t be shy about bragging about your facility! If you are the local market leader, let prospective lenders know it. Paint a great picture so they can visualize the asset.

You also want to demonstrate your knowledge of your customer base and the property’s demand drivers. Go beyond providing basic demographic information. With modern self-storage software, you can plot where your customers are actually located. This will help impress lenders that you have a good handle on your business model.

In addition, describe the property’s immediate surrounding area, as well as local and regional characteristics. You may also want to address land use and the ability/probability for new competition to arise in your market. Describe potential barriers of entry for new competition that may result from zoning restrictions or local government processes/ordinances. With construction lending gaining momentum in 2014, this will be of increasing concern to lenders.

Ownership and Management Qualifications

Recovering from the recent credit crisis, lenders today place greater focus and emphasis on sponsorship than ever before. Even if you are seeking a non-recourse loan (which uses only the property as loan collateral), your financial strength will be closely scrutinized. Simply put, you need to prove you are a worthy customer.

You can do this through two primary information presentations: proving your financial wherewithal and creditworthiness, and describing your real estate operating experience and track record. Be sure to include:

  • Property ownership structure and its principals. You may want to present an organizational chart if the ownership is complex.
  • Financial strength of the managing and majority ownership. Subsequent to the loan-request submission, be prepared to provide financial statements, tax returns and global cash flows, and a schedule of real estate owned.

You will also want to stress your self-storage management success track record and ability to achieve positive operating results. Consider including recent efforts to improve your operation, such as revenue-management techniques, website improvements and operational software upgrades/changes. Demonstrate that you are on top of managing the property and fiscally responsible.

For obvious reasons, failure to disclose any credit issues up front can be cause for lender concern and the deal may not make it to the closing table. However, I have managed many requests in which borrowers disclosed past credit problems and their subsequent resolutions, and these concerns became a non-issue going forward with the loan-request process.

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