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Warehouse & Storage Facility Loans: Working Capital for Warehouses & Self-Storage Companies

Financing for Warehouses

Warehouses and storages are used by manufacturers, wholesalers, importers, exporters, and transport businesses. They function by allowing transport optimization along the supply chain, and they enable companies to work with an optimal inventory known as an economic order quality (EOQ). The order quality that minimizes the total holding and ordering costs—it is also known as one of the oldest production scheduling models. Warehouses and storages also have multiple functions and shipping systems that permit versatile services for most companies. Thus with every current industry, significant advances are rapidly taking place as well as changes that are not to be ignored.

Quick-jump to the following sections:

Automation has been a part of many industries and well-established distribution centers around the world, although for most it has limitations. Specifically, workflow automation managed by increasingly advanced warehouse management systems. One advancement that has already taken place and that is gaining more traction warehouse robotics in the supply chain. In particular, robotics concerning operations which bring goods to the picker that require a considerable amount of specialized racking and conveyance equipment have been the leading development. Also, some highlights in the industry include the climbing robots in France. A French company has developed a warehouse robot that can climb warehouse racks and pick form any level. It can also transition to surface transportation and carry orders to human workers. Even more impressive, the robotics automation is capable of selecting 400 orders in an hour. Moreover, the worlds largest retailer, Alibaba, has embraced this trend in their warehouses reduces their human workforce by 70% further displaying the benefits of warehouse and supply companies that may want to adopt robotics in this fashion.

Other changes happening are the blurring lines between logistics and technology services. Such technological providers; 3PLs and 4PLs (third and fourth party logistics) continue to leverage IT platforms as major service-selling points. 3PL targets particular functions within supply management as in warehousing, transportation, or raw material provision. As for 4PL, it serves as an integrator that assembles the resources, capabilities, and technology of its organization and other organizations to design, build, and run comprehensive supply chain solutions. To further explain the blurring line—to some extent—it is similar to the phenomenon in the consumer markets where how it can sometimes be hard to know if you are dealing with a business entity or a software platform. In response, this blending has made it more common for companies that need short-term warehouse space the ability to connect with other businesses to use their floor or spare rack space with digital programs like FLEXE.

Next, we have the appeal of supply chain social responsibility; meaning, sustainability and carbon footprint reduction by implementing supply chain transparency. It is well known as corporate social responsibility or CSR, that aims at ensuring it is heavily complying with the spirit of the law, ethical standards, and national or international norms. Thus, warehouse and supply chain organizations have welcomed the CSR, and it continues to gain momentum. Some major companies participating include Wal-Mart; they launched Project Gigaton, a greenhouse gas reduction program involving suppliers. Alternatively, Dell, with their effort to achieve global supply chain responsibility with their initiative called 2020 Legacy of Good. And, Pepsico with their ramped up sustainability initiative in the supply chain, including water and carbon reduction.

Finally, the increased investment in material handling systems has motivated companies to hold off on replacing their old material handling equipment; all that from system design to vendor selection to implementation. The system design will include increased flexibility, agility, and modularity with there continuing to be a more substantial number of smaller orders placed with vendors. As for vendors, customers are basing less and less attention on the brand of the equipment and more focus on the quality, reliability and reporting capability of the control system. Since the most material handling equipment is now a commodity, purchases of material handling systems are more about controls than about the hardware itself. Additionally, companies purchases have changed as fewer systems will be brought from material handling equipment vendors themselves. Instead, buyers are turning to independent material handling integrators that can select the finest brand of materials for each application as opposed to the equipment firm’s own “house brand.” Then we have the implementation where companies will add capacity in the form of equipment when it is needed. Hence, warehouses will no longer take five years to start their requirements only to realize that they once again need higher capacity.

So with all the changes and advancements within the warehouse and storage industry, companies should continue to scrutinize and optimize their functions. Stay focused on a strategy to cut unnecessary cost, while still planning for recovery to continue developing with the changing times.

Types of Warehouse and Storage Facility Loans

Warehouses will need to obtain capital from time-to-time to help purchase property, refinance or consolidate their warehouse debt, upgrades and repairs to their commercial real estate, working capital for general uses, along with financing to help with marketing and other operating needs. Below we’ll take a look at some of the financing options available to warehouses and storage facilities.

Bank Loans

Warehousing and storage facilities seeking the most affordable financing options, should seek-out a bank term loan first and foremost because they offer the best rates and terms of all commercial lending options. Additionally, bank term loans can be used for just about any business use including purchasing real estate, refinancing real estate, consolidate business debt and working capital.

Rates 5-15%
Terms 1-30 years
Funding Amounts $50,000-$5,000,000
Collateral Required
Fees Medium costs

 

Bank Line of Credit

This is another type of quality financing used by storage facilities and warehouses in need of working capital. A bank line of credit is a preapproved form of financing that allows storage facilities to have access to necessary cash for working capital whenever they need it without having to seek further approval from the bank.

Rates 0% for 12 months
Terms 1-2 years
Funding Amounts $10,000-$500,000
Collateral Not be Required
Fees Medium costs

 

SBA Loans

For warehouses and storage facilities seeking affordable, bank-rate financing, but have been unable to get approved for traditional financing, a good option could be a SBA loan. SBA lending is provided by conventional lenders, and backstopped by the Small Business Administration that guarantees the government will cover a large portion of the SBA lender’s losses should the storage facility or warehouse fail to repay their business loan.

Rates 5-8%
Terms 3-25 years
Funding Amounts $50,000-$5,000,000
Collateral Required
Fees Medium costs

 

Unsecured Line of Credit

Another quality form of financing that involves a line of credit. The difference between a bank line of credit and this form of financing is that a bank loan is usually secured by the business’s assets – primarily accounts receivable – whereas an unsecured line of credit is different in that it doesn’t require collateral and is based on the business owner’s personal credit.

Rates 0% APR for 12 months
Terms 1-3 years
Funding Amounts $10,000-$500,000
Collateral Not required
Fees Medium costs

 

Alternative  Loans

Alternative lending sources are become more popular among small businesses as alternative business funding offers decent rates and terms, without much of the paperwork, credit requirements and hassles that a warehouse or storage facility would face obtaining a conventional loan. Alternative loans are mostly used for general working capital purposes, such as inventory, payroll, hiring employees, marketing, etc..

Rates 7-25%
Terms 1-5 years
Funding Amounts $50,000-$500,000
Collateral May not be required
Fees Medium costs

 

Asset Based Financing

Asset based financing is a great way for a warehouse or storage facility to obtain quality financing is to monetize their balance sheet. Asset based financing uses collateral on your balance sheet (such as real estate, accounts receivable, inventory or equipment) as security to provide lines of credit and term loans.

Rates 8-25%
Terms 1-5 years
Funding Amounts $10,000-$5,000,000
Collateral Required
Fees Medium costs

 

Cash Advance

A cash advance is an easy way for a warehouse or storage facility to obtain fast working capital in as soon as one day, without providing lots of paperwork and business documentation. Cash advances aren’t actually loans to warehouses and storage facilities, but instead the sale of the storage facility’s future revenue to a funding company at a discount. Once the transaction occurs, the storage facility will begin repaying the funding company by having a portion of their daily sales sent to the funder via ACH or through their credit card processing account.

Rates 1.10 – 1.50
Terms 3-18 months
Funding Amounts $10,000-$500,000
Collateral Not required
Fees Medium costs

Summary

As you can see there are no shortage of financing options for warehouses and storage facilities seeking financing. The key for a small business owner is to make sure that the financing they obtain has the best rates and terms for their circumstance. If you are seeking financing for your warehouse or storage facility, and need help understanding and securing the best options, reach-out to one of our funding specialists, and they’ll help you navigate the process.

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About the author
Domonique Cox

Domonique is a Minnesota native that earned her bachelors from The University of Arizona with a degree in English and Film Studies. Though books and writing are not her only interest, you can find her engaging in nutritional sciences, environmentalism, vegan cuisine, filmmaking, old school dancing, tennis, running, sound engineering, and enjoying satirical dark comedies or listening to the poetic lyrics of Bob Dylan. She is now based in Los Angeles as a content writer for GUD Capital where she spends her spare time honing her writing and directing skills. 

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