Bank vs. Private Lender for an Outdoor Storage Property

If a bank will finance your storage yard at a bank rate in the time you have, use the bank. We say that on our own website because it is true and because borrowers who come to us after a bank declined them are not surprised by the tradeoffs. Here is the honest comparison, so you can decide who to call first.

What Does a Bank Want?

A building to appraise. Two or three years of tax returns showing the property's income. A borrower with a global cash flow statement and a relationship. A loan large enough to be worth the underwriting, which at many banks means $500,000 or more. And time: 45 to 90 days from application to closing is normal, and that assumes the appraisal comes back usable, which on a gravel yard it often does not.

In exchange the bank offers the lowest rate available, long amortization, and sometimes higher leverage than a private lender. On a storage facility with a building, an established operating history, and a seller who will wait, the bank is the better deal.

What Does a Private Lender Want?

The property, mostly. Our outdoor storage program underwrites from what you paid, whether the use is permitted by right, and the income you can prove with deposits. No building required, no tax returns, no committee. One person decides. A complete file closes in 7 to 14 days, and the loan can be as small as $30,000.

The cost is the rate. Private money on a storage yard runs 14% to 16% interest only over a 12 month term (a fully amortized option is available on request), with 2 points at exit. Leverage tops out at 65% of value. That is not a bank rate and it is not meant to be. It is the price of speed, certainty, and a yes on a property the bank could not process.

How Do They Compare Side by Side?

When Should You Call the Bank First?

• The property has a building and years of clean tax returns.
• The seller will wait 90 days and the contract has no hard deadline.
• The loan is large enough that a lower rate saves real money over a long hold.
• You have an existing banking relationship that has funded similar property before.

When Should You Call a Private Lender First?

• The yard has no building, or the bank already declined it.
• The seller wants to close this month, or another buyer is waiting.
• You want cash out of a lot you own free and clear and the bank will not refinance gravel.
• The loan is under $500,000 and no bank will bother.
• You plan to sell or refinance within a year or two, so the rate matters less than getting the deal done.

Can You Use Both?

The most common pattern we see is a private loan to buy or cash out, twelve months of deposits collected into one account while the loan is in place, and then a bank refinance once the property has the operating history the bank needs. The private loan is the bridge. Plan for it that way from the start and the higher rate is a cost of a year, not a cost of the deal.

For a deeper look at the two sides, read private land lender vs. bank and how lenders value a truck parking lot.