Day 28: SBA Loans for Boat and RV Storage What Qualifies and What Doesnt

Welcome to day 28 of the Boat and RV 100 Series. I'm Joe Downs with Storage Moguls, and today I'm covering SBA financing for boat and RV storage, specifically the 7 and 504 programs, where they apply, where they don't, and how to find the right SBA lender for this asset class. Folks, the SBA program is one of the most underused financing tools in outdoor storage. Operators either don't know it applies or they try to use it on deals that don't qualify and get declined. Knowing the eligibility criteria upfront saves time and positions you to move fast when you have a qualifying deal. That's the kind of operational clarity we build at storage moguls.ai. Members of our community are becoming storage moguls, not someday, but right now. The way we define that word matters. A storage mogul is a sophisticated operator of storage assets, someone who's mastered the full arc from sourcing a deal to running one well. We don't just buy storage. We acquire and we optimize. That's not a tagline. It's a discipline, and it tends to be worth tens of thousands to hundreds of thousands of dollars per deal once you understand the difference. We're real people. We're husband and wife teams, brother-in-laws, single people. We like to call them couplepreneurs, solopreneurs, and entrepreneurs. Nobody stepped off the stage years ago and is now selling you a version of success they no longer live. We're actively evaluating deals between $400,000 and $2 million. Why? Because they're financeable. They're the kind you can actually close. And that's where the SBA is fantastic. If you want everything in this series backed by a community doing the same work, storagemuggles.ai, that's your place. Start for free, go at your own pace, level up when you want to. All right, let's get into today's episode. Believe it or not, this is one of my favorites. You got 2 SBA programs right here, 2 different structures. Both can work for boat and RV storage, but they apply in different situations. The SBA 7 is the most flexible program. It's a single loan through an SBA-approved lender and can be used for acquisition plus working capital and allows the borrower to cover a broad range of uses. Your down payment's typically 10%, maybe up to 20%. Rate is variable, tied to prime plus a spread. The SBA 504 is structured differently. A bank provides 50% first mortgage. A certified development company provides a 40% second mortgage, we'll call it, just so you understand what I'm talking about, through the SBA-backed venture That gets sold off in the secondary market and the borrower brings in 10% down. Now, I have to tell you, that structure, it's irrelevant. Think of it as one loan. It's all it's going to feel like to you. The 504 is a fixed-rate product on the CDC portion, which provides long-term rate predictability. It's designed specifically for fixed asset acquisition, real property and equipment. The critical rule both programs share is owner occupancy. The operator must be running the business at the property. For boat and RV storage, this means the borrower must be the operator, not a passive investor collecting rent from a third-party manager. I'm going to cover the distinction on the next slide. It's not what you think. Essentially, you just have to stay active. For most boat and RV acquisitions in the $400,000 to $2 million range, the 7 is the more flexible tool. The 504 actually becomes more attractive when the acquisition is a little larger. It's a pure real estate play and the borrower wants a fixed rate on the majority of the debt. You'll see it used in development as well. All right. Owner occupancy requirement is the single most common reason boat and RV deals fail SBA eligibility. Understand it precisely before you pursue this path. The SBA defines owner occupancy as the borrower operating a business at the property. Not simply owning the real estate. For a boat and RV storage facility, this means the borrower is the operator. They make the decisions. They make the decisions. They manage the business. They are not a passive investor collecting rent from a third-party manager who runs the operation independently. Examples might be some of the very, very big large names that you know and driven by and seen all the time. where they manage third-party for owners and the owners don't make any decisions. That would not qualify. Hiring a part-time site manager while you run the business is compatible with the SBA owner occupancy. So hiring a property management company, having no operational involvement is not. In this range, folks, $400,000 to $2 million, it's going to be hard not to have involvement. So I want you to consider this very likely that you'll very likely qualify for the SBA. And storagemuggles.ai will show you how to do it. All right. Size standards also apply. Most boat and RV operators in the $400,000 to $2 million range will qualify easily on size. Net worth, you just got to be under $15 million. I hope that's a That's most— actually, I hope it's none of you, but honestly, seriously, it probably is most of you. An average net income under $5 million per year. Again, probably qualifying. If you're buying at this level, size is usually not the issue. The practical test: if someone asked who runs this business, the answer should be you. If the honest answer is my property management company and I have nothing to do with it, well, then you have an eligibility problem. Boat and RV storage sits in a classification gray zone that some SBA lenders navigate easily and others get stuck on. Knowing the technical details helps you have a more productive conversation. So let's talk about the NAISC code. Most will use 531130. That's most commonly used for self-storage and many warehouse operations, which covers actually mostly boat and RV storage as well. And that's what we use the most in SBA submissions. Some lenders use 493190. When in doubt, ask your SBA lender which code they've used for similar deals. The code affects which SBA standard applies. Business classification. The SBA views outdoor vehicle storage as a real estate business with active operational component, which works in your favor. Pure passive real estate investment doesn't qualify, and operated boat and RV storage does. Revenue structure. We're going to look at recurring rental income from storage agreements is exactly the predictable Documented revenue stream the SBA program is designed around. That's what they're going to look for. Monthly tenant payments documented in a rent roll with seasonal occupancy explained. That's a clean revenue profile for an SBA submission. Your equity injection, the minimum is 10%, must come from you, the borrower, and must be documented. It cannot be borrowed from another source, gifted without proper documentation, or drawn from a retirement account in a way that creates additional debt. Your SBA lender will verify the source of those funds. Eligible expenses— acquisition price is one, closing costs, working capital for the first operating cycle, and initial improvements are all eligible. Just document every line item. The SBA requires clear use of proceeds accounting. All right, how do you find the SBA lender? Well, finding the right SBA lender for boat and RV storage is a targeted search, not a wide net. Lender experience. Yeah, lender experience with the asset class matters as much as the SBA program itself. SBA Link is the Small Business Administration's lender matching tool. It searches active SBA lender or 7 lenders by state and shows loan volume and activity levels. This matters, folks. Use it to identify high-volume SBA lenders in your state as a starting list, but follow up with the outdoor storage experience question before you go further. Industry associations are an underused resource. The Self Storage Association and Inside Self Storage both maintain relationships with lenders who specialize in storage deals. An outdoor storage lender referral from the SSA is a warm lead to a banker who has already solved the classification problem. Your commercial real estate attorney is often a great path as well. If they've closed SBA loan storage loans in your market, they know which lenders do them. It's one call. Storage Moguls community is a direct source. Operators who have closed SBA loans on boat and RV facilities are in our network, as well as self-storage facilities. And we are very close to, tied to, and recommend all the time the number one SBA self-storage lender in the country. Ask which lender we use when you join. A referral from a performing borrower. To an SBA lender who has done the deal before is also an efficient path available. Could just join storagemuggles.ai though. One-stop shop. Qualifying question, don't want to forget, is have you closed— this is for the lender— have you closed an SBA 7 or 504 loan on an outdoor vehicle storage facility? That question will filter out lenders who want to learn on your deal. Learning on your deal costs you time and potentially a deal. Don't let a lender learn on your deal. Find the one who already knows. Folks, SBA is a tool, not a default. Know when it wins and when it doesn't. SBA is strongest on first deals with limited equity. The 10% down payment requirement preserves capital that you may need for operations or second acquisition. If you're putting 20% to 25% or more down on a conventional loan, you're tying up a lot of capital on the same deal. SBA 7 can bundle acquisition financing with working capital, which is a structural advantage in the first operating cycle. A conventional loan typically requires separate lines for each purpose. If seller financing is available, though, for 30 to 40% of the purchase price, run the math before you just default to the SBA. A seller note plus a community bank loan may produce a cleaner structure with less paperwork and comparable terms. For borrowers with strong balance sheets, established track records, and multiple deals closed, Conventional financing often beats an SBA on rate and process simplicity, but it doesn't guarantee you have enough cash to get into the deal. The SBA guarantee has a cost, though— guarantee fees— but that cost is worth paying when the alternative is no loan or a significantly higher down payment or no deal at all. The thin comp scenario is where the SBA guarantee earns its fee on a boat and RV deal as well. Community bank lender who's uncomfortable making a conventional loan on an unfamiliar asset may be comfortable making an SBA loan on the same deal because that government guarantee reduces the credit risk. That's where the SBA wins clearly. The SBA submission is your standard lender package from day 27, plus additional SBA-specific documentation. Know what's different before you start. SBA Form 919 is the borrower information form, the SBA's standard intake document. Every borrower submits this. It covers business entity formation, ownership, criminal history, and prior SBA loan history. Complete it accurately. 3 years of personal tax returns. The SBA requires also full personal returns, not summaries. Have them ready. If your personal financial picture has changed materially in the last year, be prepared to explain that variance. You'll need 3 years of business tax returns if you have an existing business entity, and if you're forming a new entity for this acquisition, this requirement may not apply. So confirm with your SBA lender. Documented equity injection, the 10% down payment, it's going to be verified. Bank statements showing the funds, a paper trail of where they came from, and confirmation that they're not borrowed. That's— SBA is strict about it, about the injection sourcing. Business plan. Many SBA lenders require a business plan for the first-time operators in a specific asset class. We got you covered at sourcemoguls.ai. If not, use ChatGPT. Your lender package from day 27 covers most of what a business plan requires. Or you can, or you can look at day 27, uh, which was market analysis, financial projections, management approach, um, just reformat sections of it as the— in the business plan as you needed. You'll need an executed LOI or purchase agreement as well, as the SBA process requires the deal to be under some form of agreement. So have your LOI that you learned how to do on day 24 executed before you submit that application. Folks, SBA financing is one of the most powerful tools available to a first-time or early-stage boat and RV operator. The 10% down payment requirement, the ability to bundle working capital, and the government guarantee that reduces lender risk on an unfamiliar asset— all of these are meaningful advantages in the $400,000 to $2 million deal range. And deal— that $2 million is not the cap, just giving you an idea. Uh, well, it's the sandbox we like to play in. But it's a tool that with eligibility requirements confirm owner-operator status, confirm small business classification, and confirm the deal structure qualifies before you pursue it. A deal that doesn't qualify for SBA wastes time, damages your credibility with the lender. Find the right lender. SBA experience with outdoor storage is the filter. The classification question, the NAICS code. Which is, I believe, let me see if I can get this right, North American Industry Classification something standard, standard code. The seasonal cash flow, uh, a lender who has done it before has already solved all these. Uh, don't start the application until you have that. All right, run the math on all 3 structures: SBA, conventional community bank, and seller note plus community bank. The best structures depend on your equity position. So the seller's flexibility and the lender's comfort with the asset all matters. And then default to the structure that closes. All right. Tomorrow, day 29, we cover conventional financing structures for boat and RV acquisitions and how to structure the community bank deal when the SBA isn't the right fit. All right. Please like this video if the SBA picture got clearer today, specifically where it applies and where it doesn't. Subscribe so you don't miss day 29. Conventional financing is where most boat and RV deals in the $400,000 to $2 million range actually get done, and the structure matters. And share this with someone who's trying to figure out how to finance their first boat and RV deal, or a storage deal for that matter. The SBA question comes up early, and, and this episode answers it. Financing is where deals close or they don't. The operators who understand their options SBA, conventional, seller financing, or a combination are the ones who close more deals at better terms. StorageMoguls.ai has the deal analyzer community to, to work through financing structures with you before you walk into a lender meeting. Just join. It's free to start. You can move at your own pace. And if you're in early, you get the GPT we built for deal scenario analysis trained on real operated data, not hypotheticals. All right. Section 3 is about closing deals here, folks, that look impossible to finance until you understand the tools. We're 3 episodes in, 6 more to go. At least that doesn't sound right, but at least 6 more to go. If you want to know your options and close more deals, real deals, you should probably join StorageMoguls.ai. Tomorrow, conventional financing, how to structure the deal when the SBA path isn't the answer. See you tomorrow.