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Financing a Container Storage Company

27.10.2014 - Posted by Updated On 27.10.2014    

There are challenges to financing any new business, and if you're planning on building a storage facility with shipping containers it's no exception. The benefits to building with containers is obvious, using containers saves a great amount of construction time, and its really easy to scale up the facility as demand grows; unlike a traditional building which typically needs to be built all at one time. However, if you're dealing with a bank or other lending institution they'll be looking at a few specific items that you'll need to have addressed up front: container value, down payment, and occupancy rate/utilization.

Equipment Value

If you plan on using new shipping containers, the equipment value is clear. Prices are fairly consistent across many dealers, given the regional differences in price; and explaining the long term value is not hard to do. However, if you plan on using used equipment you'll need to be prepared to prove that the shipping containers that you're buying are at the best possible price, and still have an extended amount of life in them so that they can be paid off before the rust apart. Buying at the right price will not only benefit the bank, but your facility will perform better financially if you can calculate the long term value and cash flow of each unit.

Money Down/Sweat Equity

Just like buying any physical asset, the amount of money that you have invested into the project can impact how “bankable” the project is. Depending on the criteria and loan parameters, some lenders may allow you to use sweat equity in the transaction. Sweat equity can come from physical work that you have done, or plan on doing, or from buying the shipping containers at a price that you can prove is under the current market value. With both new and used shipping containers it's not always easy to prove the current market value, as there are very few services that can provide appraisal services and valuations of new or used shipping containers. Container surveyors usually provide insight to the condition of the container, but rarely the market value. ContainerAuction.com has the ability to provide third party valuation services of shipping container portfolios around the United States and other parts of the world.

Occupancy/Utilization

The occupancy rate or utilization of your storage facility is an important, if not the most important, ingredient in running a successful storage facility; and has a lot of influence over the financing structure behind the overall project. If you have five containers, and they are 100% occupied on 12 month agreements, it may seem like a great success; but most banks will not be interested in financing an amount this size. On top of this, as your company grows you won't be able to add more units onto the same loan. On the other side of the argument, if you decide to finance a fleet of 100 storage containers at the same time there is likely be a period of time when the occupancy rate is low and cash flow may be tight.

So what's the best way to finance shipping and storage containers? Some container leasing and financing companies provide lease rates on a per unit basis. This type of relationship will allow your company to avoid the need to take a lump sum loan from the bank and gradually build up your business as demand and visibility grows. Just like financing a car, you'll want to seek out financed lease terms with a reasonable monthly rate and an affordable buyout option at the end of a fixed period. When doing this it's important to understand the buyout price at the end of the lease and make sure the container value is correct for the amount of rent that has been paid.

Shipping and storage container finance is a unique type of finance that many local banks don't completely understand, or have the appetite to take on. To finance a storage facility it's important to understand the current and future value of the shipping containers, how much money you have to invest in the facility, and how to effectively manage it and keep the utilization rate high.

If you plan on building a shipping container storage facility and have questions about financing the units, ContainerAuction.com can provide advice, input, and consulting services to get your facility structured and running - the sellers on our site can help you find the containers. Feel free to contact our sellers or staff at any time to discuss your situation.



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