A couple weeks ago, we talked about how loans from the SBA (Small Business Association) can help you unlock millions in financing that you might otherwise NEVER qualify for…

Today we’re going to dive a little deeper. And here’s my first big reveal:

The Small Business Administration doesn't actually lend you money.

Not one cent. And yet, SBA loans are probably the most powerful tool in self-storage financing for investors who know how to use them.

So if the SBA isn't writing checks, what are they doing? And more importantly, how does understanding this make you money?

By the end of this email, you'll understand how this "middleman" structure actually works, and why it’s in your favor…

💡 How SBA Loans Actually Work (And Why It Matters)

Think of the SBA like an insurance company.

When you get an "SBA loan," here's what's really happening:

A regular bank is lending you the money, but the SBA is guaranteeing up to 90% of that loan.

So if you default, the bank doesn't lose everything – they get reimbursed by the government for most of it.

This changes the entire game.

Because the bank's risk is dramatically reduced, they're willing to do things they'd NEVER do with conventional financing:

• Lend to first-time storage operators with no industry experience

• Finance up to 90% of the purchase price (vs. 65-75% conventional)

• Skip the brutal "net worth = loan amount" requirement that conventional banks demand

• Relax the liquidity requirements (you don't need 5-10% of the loan sitting in cash post-closing)

It's like having your rich uncle cosign your loan… Except it's Uncle Sam, and he's got a $31 trillion credit line.

Here's a real example:

My client is buying a $1M property with another $1M in construction to triple the size. Total project: $2.2 million.

With conventional financing he'd need $550,000-$660,000 down (25-30%).

But with the SBA structure we put together, he's bringing $130,000-$140,000 to closing. That's about 6% down.

We even got the seller to carry $70,000 as seller financing that counted toward equity instead of debt (there's some creative structuring magic here, but that's a story for another day).

Why does this structure exist?

Back in 2009, the SBA designated self-storage as "owner-user" property. Basically, if you're going to manage the facility yourself, they'll back the loan because you're creating a small business.

This opened the floodgates for mom-and-pop operators to get into the game without needing massive cash reserves.

The catch? There's always a catch.

The SBA charges a guarantee fee. Typically it’s around 3% of the loan amount.

So on a $1.8M loan, that's $54,000. Banks usually roll this into the loan, but it's real money.

Also, SBA loans are ALWAYS “recourse,” meaning you're personally on the hook if things go sideways.

But here's why it's still worth it: The leverage you get and the equity you preserve will almost always outweigh that guarantee fee… Especially on your first few deals when you're building your portfolio.

Bottom line: The SBA isn't lending you money, they're giving banks the confidence to lend to YOU. And once you understand how that structure works, you can use it to finance deals that conventional banks would laugh you out of the room for asking about.

Next time, I'm going to break down the two main SBA programs (7(a) vs. 504) in detail. Which one to use when, what the pros and cons are, and how to pick the right structure for YOUR deal.

Quick question: Are you currently working on a deal, or are you in the "learning mode" phase right now? Hit reply and let me know—I tailor these emails based on where you're at.

Here’s to your success,

Cody