1. SBA Financing for Self-Storage Construction Terry Campbell – Live Oak Bank 1741 Tiburon Drive Wilmington, NC 28403 910-202-6933 www.liveoakbank.com

2. Agenda  Introduction to Live Oak  SBA Financing for Self-Storage  7a Program-The good, the bad and the ugly  Terms & Qualifications  504 Program  Q + A

3.  There will be 3 pop quiz questions at the end  YETI Tumblers! Terry Campbell – Live Oak Bank Prizes!

4.  In 2015 there were approximately $33,000,000,000 (33 billion) SBA loans closed.  The SBA program started in 1953, but it took 57 years for Self-Storage to become eligible! In fall of 2010, the SBA decided that Self-Storage was now eligible under their rules.  What happened….Lots of expectations, but disappointing results.  All banks CAN do an SBA loan, but many are not well versed. Terry Campbell – Live Oak Bank SBA Lending

5.  Loan Amounts Up to $5 Million (75% guaranteed by SBA)  Cash flow based loan (not net worth or LTV)  How do you know cash flow on a project that isn’t built yet?  25 year fully amortizing loan  Better cash flow  No balloons, calls or financial covenants  Loans can be used for construction, acquisition, refinance, or expansion Terry Campbell – Live Oak Bank 7a Program-The Good, the Bad and the Ugly

6.  No minimum equity requirements  100%?  Short prepayment penalty-3 years  $5 million cap (or use pari-passu)  No bank origination fee  SBA fees apply-approximately 2.5% on total loan amount (remember, no balloons!) Terry Campbell – Live Oak Bank 7a Program-The Good, the Bad and the Ugly - continued

7.  Thank you for your service!  Veterans get a discount of 50% off the SBA fees through September 2016! Terry Campbell – Live Oak Bank Veteran??  Special ‘discount’ for BETCO customers if you heard of us at this seminar!

8.  Interest reserve during construction can be financed  Working capital and payments through breakeven can be financed  Working with a Preferred Lender of the SBA will be faster & more efficient  How long does it take??  Variable or fixed rates are available Terry Campbell – Live Oak Bank 7a Program-The Good, the Bad and the Ugly - Continued

9.  You must be actively involved in the management of the business  20% or more ownership = Guarantor  Qualifications of Guarantor Good credit score No felonies No default on other government loans Must be a US Citizen or legal resident alien (green card) $5,000,000/$15,000,000 rule Credit elsewhere Can not ‘cash out’  Loan must be fully collateralized if possible Terry Campbell – Live Oak Bank Terms and Conditions

10.  On new construction, a licensed GC is required  Should be a ‘qualified’ GC.  They should have adequate commercial or self-storage experience  Most problems on projects come from construction….and most of those are from having unqualified/unexperienced GC’s. (delays, overruns, spread too thin)  Do it yourself contracting is allowed, but the borrower has to be a qualified GC and be approved by the lender.  The cost has to be the same, or less than an unaffiliated GC would charge.  They can not make a profit on the construction. Terry Campbell – Live Oak Bank Terms and Conditions - Continued

11.  How can you use it  When does it make sense to use it Terry Campbell – Live Oak Bank 504 Program

12.  Primarily used for the purchase, expansion or new construction of real estate and improvements  Cannot be used for any of the following:  Working capital  Goodwill  Debt refi (unless land or part of an expansion of building) Terry Campbell – Live Oak Bank 504 Use of funds (as it relates to SS)

13.  The SBA 504 program is a public/private partnership with a typical structure of  50% senior lien funded by a bank, credit union or non-bank lender  Typically a 35% to 40% second lien funded by SBA  Borrower down payment of 10% to %15  The SBA loan is facilitated through a local non-profit entity licensed by the SBA known as a Certified Development Company (CDC)  CDC can operate state wide  Some CDC’s operate in bordering states  Because there is no national CDC, service levels can be inconsistent Terry Campbell – Live Oak Bank Entities involved

14.  A project is considered Green if, when purchasing an existing building, a borrower can save 10% or more of the prior year’s power consumption  For new construction, the borrower must generate at least 10% power from renewable sources  Solar  Wind  Geothermal  A Green 504 allows a borrower to access up to $5,000,000 in gross SBA 504 proceeds per project  But there is no cap of the number of Green projects developed by a borrower  An energy audit is required, similar to an appraisal or environmental report 15 Terry Campbell – Live Oak Bank The Green SBA 504 Loan

15. The SBA programs are very viable options to finance Self-Storage projects with lower out-of-pocket costs, longer terms and with no costly balloons. While no loan fits all, education of these loans will help people to see and understand what they are and how they work. Terry Campbell – Live Oak Bank Why SBA

16. Terry Campbell- General Manager 910.202.6933 terry.campbell@liveoakbank.com Pop quiz to follow! Terry Campbell – Live Oak Bank Questions?