How to Finance a Warehouse Lease and Buildout for E-Commerce
Learn how to finance transitioning from 3PL to your own warehouse, including lease costs, buildout expenses, and equipment needs.
When to Move from 3PL to Your Own Warehouse
Most e-commerce businesses start with third-party logistics (3PL) providers, but there comes a point where running your own warehouse makes financial sense. That inflection point typically arrives when monthly 3PL fees exceed $15,000-$20,000, when you need more control over fulfillment quality, or when your growth is constrained by 3PL capacity.
Moving to your own warehouse requires significant upfront capital, but the long-term economics often favor in-house operations for growing e-commerce brands.
Total Cost to Set Up a Warehouse
Expect to budget for multiple cost categories:
| Category | Cost Range | Notes |
|---|---|---|
| Security deposit | $15,000-$50,000 | 2-3 months rent |
| First month rent | $5,000-$20,000 | Varies by market and size |
| Buildout/improvements | $25,000-$100,000 | Racking, lighting, office |
| Equipment | $50,000-$150,000 | Forklifts, conveyors, packing stations |
| Technology/WMS | $10,000-$50,000 | Warehouse management system |
| Initial inventory | $50,000+ | Stock to fill the warehouse |
| Working capital | $25,000-$75,000 | Staff, utilities, operations |
| Total range | $180,000-$545,000 | For 10,000-25,000 sq ft facility |
Financing Options for Warehouse Setup
Multiple financing products typically combine to fund a warehouse transition:
- SBA 7(a) - Comprehensive funding covering buildout, equipment, and working capital. Best rates, longest terms.
- Equipment Financing - Dedicated financing for forklifts, racking systems, conveyors, and technology.
- Term Loan - Lump sum for buildout and setup costs. Faster than SBA.
- Business Line of Credit - Ongoing working capital for operations and inventory.
- Landlord TI Allowance - Negotiate tenant improvement dollars from the landlord.
The SBA Approach
For e-commerce businesses with strong financials, SBA 7(a) loans often provide the best path to warehouse ownership. One loan can cover multiple needs:
| Use | Amount | Term |
|---|---|---|
| Leasehold improvements | $75,000 | 10 years |
| Equipment (racking, forklifts) | $100,000 | 10 years |
| Working capital | $50,000 | 10 years |
| Total SBA loan | $225,000 | Blended 10-year term |
| Estimated monthly payment | $2,800 | At 11% interest |
Start the SBA application process 4-6 months before your target move date. SBA loans take time but the lower rates significantly reduce your monthly costs.
Step-by-Step Timeline
Planning a warehouse transition requires careful sequencing:
- 6 months out: Begin SBA application, start warehouse search
- 5 months out: Receive SBA pre-approval, negotiate lease terms
- 4 months out: Sign lease with contingencies, order long-lead equipment
- 3 months out: Close financing, begin buildout
- 2 months out: Install racking and equipment, set up WMS
- 1 month out: Hire and train staff, test systems
- Launch: Begin transferring inventory from 3PL
- Month 2: Full operations, end 3PL relationship
What Lenders Evaluate
Lenders assess warehouse financing applications based on:
- Current 3PL costs and projected savings
- E-commerce revenue history and growth trajectory
- Lease terms and landlord creditworthiness
- Equipment appraisals for collateral value
- Management team experience in operations
- Cash flow projections for warehouse operations
- Contingency plans if transition takes longer than expected
Example Deal
E-commerce brand profile: $3.5M annual revenue, currently paying $22K/month to 3PL, 25% gross margins, 4 years in business.
| Component | Details |
|---|---|
| Warehouse size | 15,000 sq ft |
| Monthly rent | $12,000 |
| Financing obtained | SBA 7(a) $300,000 |
| Use of funds | $100K buildout, $125K equipment, $75K working capital |
| Monthly loan payment | $3,700 |
| Total monthly cost | $15,700 (rent + loan) |
| Previous 3PL cost | $22,000 |
| Monthly savings | $6,300 |
| Annual savings | $75,600 |
Mistakes to Avoid
Common errors in warehouse transitions:
- Underestimating buildout costs - get detailed contractor bids before committing
- Insufficient working capital for operational ramp-up
- Leasing too much space too soon - start lean and expand
- Not negotiating landlord TI contributions
Ready to explore your options?
See what financing you qualify for in minutes — no impact to your credit score.
Related Articles
SBA Loans for E-Commerce Businesses: Funding Inventory and Growth
How e-commerce business owners can use SBA loans to finance inventory, warehouse space, technology infrastructure, and strategic growth.
Read more →Equipment Financing for E-Commerce: Warehousing, Packaging and Fulfillment
How e-commerce businesses can finance warehouse equipment, packaging machinery, fulfillment systems, and technology infrastructure.
Read more →Commercial Real Estate Loans: Buying Your Business Location
Guide to financing owner-occupied commercial property. Compare SBA 504, SBA 7(a), and conventional commercial mortgages for purchasing your business location.
Read more →Important Disclosure
Not Financial Advice: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. You should consult with qualified professionals before making any financial decisions.
No Guarantee of Financing: Liminal Lending Co. is a business loan marketplace that connects borrowers with third-party lenders. We are not a lender and do not make credit decisions. Submitting an application does not guarantee approval or funding. Loan terms, rates, and availability vary by lender and are subject to borrower qualifications and lender criteria.
Third-Party Lenders: All loan products are offered by independent third-party lenders. Liminal Lending Co. is an Independent Sales Organization (ISO) and receives compensation from lenders for successful referrals. Terms and conditions of any loan are between you and the lender.
Rate Information: Rates, terms, and fees mentioned in this article are estimates based on publicly available information and may not reflect current market conditions or specific lender offers. Actual rates depend on creditworthiness, business financials, and lender policies.
Information May Change: Financial markets, lending regulations, and economic conditions are subject to rapid change. While we strive to keep our content accurate and up-to-date, information in this article may become outdated. Always verify current rates, terms, program availability, and regulatory requirements with lenders and official sources before making financial decisions.