Inside Self-Storage

JAN 2019

Inside Self-Storage (ISS) is an information source for industry owners, managers, developers and investors covering news, trends, facility operation, finance, real estate, construction, development, marketing, technology, insurance and legality.

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Collateral Lenders aren't interested only in what happens if everything goes well. They also must consider worst-case scenarios. For instance, what if you choose to not repay the loan? Collateral helps solve this problem by acting as a secondary source of repayment. Lenders will consider the value of the business and personal assets of the guarantors as potential security for the loan. Collateral also acts as a psychological motivator, as people tend to get more resourceful when they have something to lose. It's an important consideration, and its significance varies based on loan type. Any lender should be able to explain the types of collateral needed for your specific situation. Cash Flow To ultimately approve the loan, your lender will want to be comfortable with how successfully your firm can repay it. In business financing, there's a different paradigm in evaluating repayment ability than in consumer financing. With business loans, repayment ability comes from the performance of the business being evaluated. The capacity to repay comes from cash flow, which is the amount of cash available after ordinary expenses have been paid. Your business should have sufficient income to support its expenses and debts comfortably, while also providing principals' salaries sufficient to support personal expenses and debts. Cash-flow management is an imperative skill for any small business owner, including one in self-storage. The five Cs are the pillars of a typical credit analysis. They help lenders evaluate self-storage owners and their business to better understand the risks in making a loan and determining the likelihood that it will be successfully repaid. Terry Campbell is general manager for the self-storage lending division of Live Oak Bank, which specializes in financing for facility acquisitions, construction, expansion, refinancing or renovation. He has more than 23 years of self-storage industry experience as a supplier as well as ownership in self-storage projects. For more information, call 910.202.6933; e-mail terry.campbell@liveoak.bank; visit www.liveoakbank.com/self-storage. • Make sure your credit reports are accurate. • Pinpoint what you need to improve. • Create a plan to improve your credit score. • Fix your late payments. • Build a strong credit age. • Clear up any collection accounts. • Don't let old mistakes unfairly haunt you. • Get a credit card. • Open a secured credit card. • Limit credit applications. • Fix your credit-utilization ratio. Source: Credit.com, "11 Ways to Improve Your Credit Score" Improve Your Personal Creditworthiness January 2019 I ISS 29

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