IOS Financing: Banks, SBA, Sale-Leasebacks & Private Credit

Financing industrial outdoor storage (IOS) is both easier and harder than financing buildings. Easier, because the assets are simple, durable, and land-anchored; harder, because some lenders are unfamiliar with low-coverage yards and underwrite them cautiously, and because environmental and entitlement issues can complicate loans. Understanding the capital options helps owners structure deals and improve returns.

Bank and credit-union loans

Conventional bank and credit-union loans are the backbone of IOS financing, especially for smaller and mid-sized deals and local sponsors. Banks lend against the land value, the in-place income, and the borrower's strength, typically at conservative loan-to-value ratios given the land-heavy collateral. They scrutinize environmental condition (a Phase I is standard, Phase II if flagged), zoning and legal use, surface condition, and lease quality — the same items covered in IOS Due Diligence. Relationship banks that understand IOS can be flexible; those that do not may misprice the asset as raw land or avoid outdoor storage entirely.

SBA financing for owner-users

For owner-users — a contractor, trucking company, or equipment firm buying a yard to operate from — SBA 504 and 7(a) loans can be powerful, offering high leverage and long terms with relatively low equity. The 504 program in particular is designed for owner-occupied real estate. SBA financing requires genuine owner-occupancy, which makes it a tool for operating companies rather than passive investors, and it can be a real competitive advantage for owner-users bidding against investors for the same yard.

Life-company, CMBS, and private credit

Larger, stabilized IOS assets can access life-company and CMBS debt, which offer scale and long terms for institutional-quality, leased product. At the other end of the business-plan spectrum, private credit and bridge lenders fill the gaps banks leave — transitional assets, value-add and lease-up plans, entitlement plays, quick closings, and deals where environmental or zoning hair scares off conventional lenders. Private credit is more expensive than bank debt but faster and more flexible, and it is often the right tool to acquire and stabilize a yard before refinancing into cheaper permanent debt.

Sale-leasebacks

Sale-leasebacks are a defining transaction in IOS. A company that owns and operates from a yard sells the real estate to an investor and signs a long-term lease to keep using it. The operator unlocks capital trapped in real estate to reinvest in its business, while the investor acquires a stabilized, often net-leased asset with an in-place tenant who has every incentive to stay. Sale-leasebacks have been a major source of institutional IOS acquisitions, converting operator-owned yards into investment product — a dynamic that connects directly to IOS Valuation.

Preferred equity

For larger and development-stage deals, preferred equity sits between senior debt and common equity, providing capital at a fixed return with priority over common equity but subordinate to the loan. It helps sponsors fill the capital stack, reduce common-equity needs, and finance value-add or development — see IOS Development — without taking on more senior leverage than a lender allows.

Frequently Asked Questions

How is IOS financed?

IOS is financed through conventional bank and credit-union loans, SBA 504 and 7(a) loans for owner-users, life-company and CMBS debt for larger stabilized assets, private credit and bridge loans for transitional deals, and sale-leasebacks or preferred equity for capital structuring. Lenders focus on the land value, entitlement, surface condition, environmental status, and the durability of yard income, and clean environmental and zoning diligence is what makes IOS financeable.

Can you use an SBA loan to buy IOS?

Yes, for owner-users. SBA 504 and 7(a) loans suit operating companies — contractors, truckers, equipment firms — buying a yard to operate from, offering high leverage and long terms with relatively low equity. They require genuine owner-occupancy, so they are a tool for operating businesses rather than passive investors, and they can be a competitive advantage for owner-users bidding against investors.

What is a sale-leaseback in IOS?

A sale-leaseback is when a company that owns and operates from an IOS yard sells the property to an investor and simultaneously signs a long-term lease to keep using it. The operating company unlocks capital tied up in real estate while keeping operational control, and the investor acquires a stabilized, often net-leased asset with an in-place credit tenant who has every incentive to stay.

Why is IOS sometimes hard to finance?

Some lenders are unfamiliar with low-coverage yards and may misprice them as raw land, and environmental or entitlement issues can complicate loans. Lenders who understand IOS finance it readily on the land value and durable income, but unfamiliar lenders may apply conservative loan-to-value ratios or decline. Clean environmental and entitlement diligence is the key to making a yard financeable.

What is preferred equity in an IOS deal?

Preferred equity sits between senior debt and common equity, providing capital at a fixed return with priority over common equity but subordinate to the loan. It helps sponsors fill the capital stack, reduce common-equity needs, and finance value-add or development without taking on more senior leverage than a lender allows. It is most relevant to larger and institutional IOS deals.

Financing or recapitalizing an IOS deal?

Carson Jones is a licensed commercial real estate advisor and business broker with eXp Commercial. For acquisitions, dispositions, sale-leasebacks, and connecting to the right capital for IOS, get an experienced read on structure and value.

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Educational only — not legal, tax, or investment advice. Loan programs, rates, and terms vary by lender and change over time; verify current terms and engage qualified professionals. Carson Jones is a licensed commercial real estate advisor with eXp Commercial. Last updated June 19, 2026.

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Carson Jones is the host of Carson's Corner: Commercial Real Estate, author of The Red Flag Playbook, a licensed commercial real estate advisor and business broker, and the founder of Passive Investments. With 18 years of experience as an entrepreneur and 12 years specializing in passive investing, Carson works with high-net-worth individuals, family offices, business owners, and sophisticated investors as a broker, principal, and capital partner.

Carson holds a BBA in Finance from Baylor University and his Tennessee commercial real estate license (#382989). He actively pursues acquisition and equity opportunities across the United States through a nationwide network of qualified buyers, family offices, institutional investors, and top-tier developers.

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This article is for informational and educational purposes only and should not be considered tax, legal, accounting, or investment advice. Tax laws are complex and change frequently. Always consult your CPA, attorney, and financial advisor before making any financial, tax, or investment decisions. All investments and property ownership carry risk, including the potential loss of principal. Carson Jones, Passive Investments, and the author make no guarantees regarding the tax treatment, performance, or outcome of any specific investment strategy described in this article.