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SBA Cold Storage Financing

The importance of cold storage facilities cannot be underestimated especially in the current times. These facilities ensure that the perishable stocks do not deteriorate by reaching their intended destination in the required freshness and safety. But, cold storage facilities entail high monetary expenses.

by | Jul 1, 2024

How to Finance Your Cold Storage with SBA Loans

Agricultural Regulatory Compliance

The importance of cold storage facilities cannot be underestimated especially in the current times. These facilities ensure that the perishable stocks do not deteriorate by reaching their intended destination in the required freshness and safety. But, cold storage facilities entail high monetary expenses.

Fortunately, for businesses whose storage requirements can only be met through the acquisition of cold storage equipment, there is a way out through the Small Business Administration SBA, which provides different kinds of loans to qualified businesses.

Cold Storage Business: The Best SBA Loans to Apply for and Why

The SBA offers certain types of loans that are quite suitable for the funding of cold storage warehouses and supplies. The most suitable for use are the SBA’s 7(a) Loan, the SBA 504 Loan, and the SBA Microloan.

Another program worth considering is the SBA Microloan program which is suitable for small financial requirements. It offers loans of up to $50,000. It caters to those businesses requiring small amounts for purchases such as a single cooler or small modifications to a facility. 

SBA Loans and Its Uses in the Cold Storage Warehousing.

Understanding Loan-to-Value Ratio in ABL

The first major benefit of SBA loans is a much lower down payment requirement in comparison to other loans. In general, the loan for small business from SBA demands not more than a ten percent down payment. 

For instance, with SBA 7(a) of $1 million, a business organization is required to place only $100,000 down. In this context, it is easier for business organizations to be in absolute control of their cash and how they achieve optimal utilization of resources.

Yet another advantage is the fact that the SBA loans come with fairly long repayment periods. Such terms can go up to 25 years on real estate and 10 years on equipment which drastically brings down monthly payment obligations. 

Thus, taking a machinery and equipment loan of $500 000, payable over a period of 10 years at a 6% annual interest rate, means that the amount of monthly installment to be made shall be approximately $5,552. 

Also, SBA loans are characterized by a more favorable interest rate than most other types of loans. According to the updated SBA 7(a) loan information, the current rates are starting from 3% to 6.5% above base rate. 

These rates are usually below the ones of regular business loans, and that is why SBA loans are considered to be quite affordable to finance the construction of temperature-controlled warehouses.

Terms, Interest, and Qualification Requirements

SBA loans have flexible terms. For instance, the SBA 7(a) loan comes with one of the longest allowable terms of up to 25 years for real estate and up to 10 years for equipment and working capital. The terms of the SBA 504 loan may vary and it can be given for 10 years, 20 years, or 25 years. 

SBA Microloans, on the other hand, maybe for terms as long as six years to empower borrowers with small, specific requirements. For SBA loans most of the interests charged tend to be below those expected on conventional loans.  

There are requirements that need to be fulfilled when applying for an SBA loan such as being a for-profit business, being located in the United States, having available owner’s investment, and a viable need for the credit. Also, required documentation required include valid financial documents and detailed and solid business plan to increase chances of approval . 

The main factors affecting the approval chances are experience in the cold chain management business or sector, and the clear utilization plan as to the given loan. 

Possible Applications of SBA Loans in Cold Storage Warehouse.

Benefits of Opting for ABL Loans

SBA loans can be used for myriad purposes that pertain to cold storage, including the purchase of refrigerated containers, in the supply chain, acquisition of real estate, and, importantly, operational capital. 

It is essential to note that one of the most common applications of SBA loans in cold storage businesses is the acquisition of new fridges, freezers, and other necessary equipment. 

For example, a business needing $200,000 to upgrade refrigeration system,can be able to use SBA 7(a) loan to finance this investment and then structure the payments over a period of ten years to effectively deal with the cash flow.

SBA loans are also used in procuring real estates for the use in cold storage purposes. These loans enable businesses to acquire or develop structures that would be used for the storage of perishable goods. This investment not only increases the business’s internal and managerial capacity but also increases its fixed asset base. 

Also, SBA loans offer financing for operational necessities such as salaries, electricity, water, and stock. This is again helpful especially during the periods of low demand or low number of guests in the hotel.  

SBA Loans: the Application Process

Factoring vs Tangible Assets

The first item of business that needs to be accomplished before actually applying for a business loan is to prepare a comprehensive business plan. This plan should contain information about the business and its functions, plans for spending the money, and financial expectations. 

An existing cold storage business planning on expanding its facility and warehousing should prepare well articulated financial projections and market feasibility to justify extra space to store additional commercial goods.

After this, the businesses must obtain a complete set of financial papers and records. Among these are tax returns, balance sheets and statements of profit or loss. Accurate records assist the lenders in evaluating the financial position of the business as well as the ability of the business to repay the loan.

Your business may be required to submit three years of tax returns and current balance sheets, income statements and statements of cash flow illustrating adequate and increasing revenue and profitability.

Last but not the least, businesses need to use an SBA approved lender. Approaching a lender with experience in this kind of services can therefore be easier and increase the probability of success. For instance, an associated SBA affiliated local bank is able to provide support specific to the borrower and fast-track loan approval.

Some Key Facts About SBA Loans

Understanding Account-Based Loans - ABL Loans

The process of getting approval for SBA loans may be in weeks, in some cases running to several months. Lenders should set their transfers into the appropriate budget to make sure the money is available when needed most. It is expected that from the time of submission of the application to the disbursal of the loan, it can take anything between 60-90 days. 

Depending on the properties of the loan offer and the activity of the applicant in terms of providing additional documentation The above timeline may take longer depending on the type and terms of the loan offer.

Guarantees are common when it comes to SBA loans, especially for the amounts above which the loan is issued. This can range from real estate, machinery, and equipment, or any other property considered as security. For example, a company may leverage its cold storage facility in order to access credit facilities; in this case, the lender is secured in the event of non-performance.

The credit rating is highly important when it comes to obtaining an SBA loan. For eligibility and interest rates, there is evaluation of personal as well as business credit scores. A business owner with a personal credit score of say 700 will be approved and offered better conditions than a business owner with a score of 600.


There are endless challenges when it comes to financing cold storage facilities.  SBA loans present a realistic option because of the reasonable terms, favorable interest rates, and large loan amounts.

Contact Flaney Capital for assistance in the application process and for connection with low interest lenders in the  region. Call 1-888-822-0844.

Watch Our Videos

Are you ready to take your business to new heights? Discover the power of the SBA Business Industry Program. With its comprehensive eligibility criteria, underwriting requirements, and loan guarantees, this program provides accessible and affordable loan options for businesses in rural areas.

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Here are some answers to Frequently Asked Questions.

What are the main advantages of ABL loans?
ABL loans allow companies to use their existing assets as collateral for financing, providing greater flexibility than traditional lending methods.
Are there any risks associated with ABL loans?
Yes, if a business cannot repay its loan, the lender may seize the assets used as collateral. Businesses need to understand this risk before opting for an ABL loan.
How does accounts receivable factoring work for ABL loans?
In accounts receivable factoring within the context of ABL loans, a business sells its outstanding invoices (accounts receivable) at a discount to obtain immediate cash.
What is involved in the due diligence process for obtaining an ABL loan?
The due diligence process typically involves assessing a company’s financial health, including reviewing its balance sheet, income statement, and cash flow statement, among other things.
Can all types of companies apply for an ABL loan?
While any company can apply for an ABL loan, it is particularly beneficial for those with a high volume of accounts receivable or significant tangible assets.