January 2020
Borrower Profile
Big Things in Store for Cocoa Saver Storage Thanks to the SBA 504 Loan Program

We all have stuff, some more than others, and we need a secure place to keep it.  Believe it or not, the concept of self-storage dates all the way back to 4,000 B.C. in Xi’an, China when an innovative fella crafted large clay pots to hold his valuables and kept them in underground pits. He paid guards in food and water to watch over the sites and before long, other people were using his service to keep their own treasures safe.  The self-storage industry was born.

Big Things in Store for Cocoa Saver Storage Thanks to the SBA 504 Loan ProgramA little over 6,000 years later, Jacob “JC” Smoot recently added to his own self-storage history with the purchase of Cocoa Saver Storage, LLC.  Smoot has previous self-storage experience having owned other storage businesses in Florida.  When he was ready to finance the purchase of an existing self-storage business located in Cocoa, Florida, Smoot worked with Florida First Capital to acquire a $4.8 million Small Business Administration (SBA) 504 loan.

The 97,081 square-foot facility was constructed in 1981 and contains a total of 332 units situated on 10.67 acres.  The Cocoa Saver Storage property also provides space for parking large recreational vehicles.

Just a few years ago, mini-warehouses/self-storage facilities were considered “special use” properties under the 504 Loan Program and required a higher down payment of 15%.  Thanks to a reclassification by the SBA, these properties are no longer considered special use and qualify for the lower 10% down payment.

Additionally, Cocoa Saver Storage was a business acquisition – something many borrowers assume isn’t eligible for an SBA 504 loan.  Although the funds can’t be used to directly purchase a business, a 504 loan can be an ideal solution if the business being acquired includes an asset purchase.

If the business acquisition is not strictly an asset purchase, a borrower can get a concurrent SBA 7(a) loan to cover those costs.  Using the 504 Loan Program to fund the real estate and equipment portion of a business acquisition brings advantages that a straight 7(a) loan just cannot provide.

“People often don’t think of an SBA 504 loan for business acquisitions,” said Kristen Tackett, Florida First Capital Vice President and Business Development Officer for Northeast Florida.  “If commercial property and/or major equipment is included in the acquisition, using a 504 loan to purchase these assets offers more benefits than a 7(a) loan, including fixed interest rates and only 10% down.” she said.

The SBA 504 Loan Program provides up to 90% financing at below-market, fixed interest rates and long amortization terms up to 25 years for the purchase of major fixed assets, such as owner-occupied commercial real estate, renovations, new construction, energy efficient “green” initiatives and/or fixed heavy duty machinery and equipment.

504 loans are paired with private-sector commercial loans and provide up to $5 million of aggregate SBA eligibility on standard 504 projects; up to $5.5 million per 504 energy efficient green project not exceed $16.5 million in the aggregate; and up to $5.5 million per eligible small manufacturing project with no limit on total SBA dollars available.  These are SBA 2nd mortgage loan portions only; there is no limit on overall project dollar size.

The fluid nature of small business financing regulations and property classifications can often change in favor of the borrower. This is why we recommend checking with our SBA 504 loan experts for the latest information on project eligibility.

For more information about SBA 504 loans in Alabama, Florida or South Georgia, contact a Florida First Capital Loan Officer or email us at info@FloridaFirst.com.  Phone: 850.681.3601 or toll-free at 800.504.LOAN.