We’ve all heard the statistics about starting a business. Most businesses don’t make it past 10 years in operation, and quite a few of them tap out long before they reach the 10-year mark.
No business owner goes into the world of entrepreneurship with the intention of failing. Many do, though, and one of the most common reasons for that is the fact that they don’t have the adequate cash flow to grow their business and handle things like office construction.
Are you in this position right now?
If you’re having a hard time finding money to cover the cost of office construction for your business, keep reading. Listed below are some tips that will help to simplify the process for you.
Start with Bootstrapping
As a business owner, you’re probably well-acquainted with the idea of bootstrapping. In case you’re not, though, bootstrapping essentially involves scraping together as much capital as you can from your own resources.
Some examples of bootstrapping include the following:
- Using credit cards
- Tapping into your 401(k)
- Borrowing against the equity in your house
These can all be good options, especially if you have a high credit score, have quite a bit of money in your retirement account, or have a lot of equity accrued in your house.
If none of these situations are the case for you, or if you’ve already used those funds for another aspect of your business, you’ll likely need to consider alternative financing methods.
The next option to consider if you can’t bootstrap your way to a new office location is crowdfunding. A lot of businesses have great success using platforms like Kickstarter or IndieGoGo to help them raise money for their business.
Remember, though, that you’ll need to raise a lot of money on these platforms if you want to use it to finance a big construction project.
If you have faith that people are willing to pledge money and invest in your business, go for it. It’s not a good long-term funding solution, though, and there is a certain amount of risk involved, especially if you find that you’re not able to meet your goal.
Apply for Construction Loans
If you’re not prepared to crowdfund this project and you don’t have enough money in the bank to handle it yourself, consider applying for a construction-specific loan.
Construction loans are a great option for those who need to finance a big building project. You can also use them for other aspects of growing your business, too, like hiring employees or purchasing building materials.
When you apply for a construction loan, expect to pay a significant downpayment. Prepare for a rigorous application process, too. This is especially true when it comes to commercial construction loans, which most lenders consider to be quite risky.
Seek Advice from Locals
Not everyone is able to qualify for construction loans from traditional lenders. That doesn’t mean you have to give up on your goal, though.
Reach out to local business owners or seek advice from your local business development center. There are dozens of these facilities throughout the country (many are located at universities but are available to any business owner).
These centers can help you to connect with other entrepreneurs and get advice on how to finance your new office construction project.
You can also get help finding different types of loans and applying for them. Working with an expert during the application process can help you increase your chances of getting approved.
Apply for SBA Loans
Another loan option you might want to consider is a loan guaranteed by the Small Business Administration (also known as the SBA).
SBA loans come with lower-than-average interest rates and great terms for new business owners. There are several different types of these loans available depending on your specific needs, too.
The application process for them is pretty intense, though.
If you want to increase your chances of getting approved, it’s best to work closely with someone from a business development center. They’ll help to guide you through the process and let you know if an SBA loan is a viable option for you.
Reach Out to Angel Investors
Angel investors are individuals (usually established businessmen or women) who are looking to invest in up-and-coming businesses. If you can attract an angel investor, you’ll likely be able to get the funding you need to pay for your new office construction.
Reach out to other entrepreneurs in your area (this is another reason why working with your local business development center is a good idea) to find out about angel investors who may be willing to give you the money you need.
You can also search online through networks like the Angel Capital Association to connect with investor groups throughout the nation.
Consider Hard Money Loans
There are lots of other alternative funding sources you may want to consider as well. For example, you could work with a hard money lender.
Hard money loans are often used for real estate transactions and can be a good option for those looking to purchase or build office space for their business. With these loans, the terms are based on the value of the property, which is used as collateral.
If you don’t have a good credit score and are having trouble getting funding from a bank or credit union, hard money lending might be something worth considering.
Just keep in mind that hard money loans often have higher interest rates since the risk to the lender is considered greater.
Need More Help Finding Money?
As you can see, there are quite a few different ways you can go about finding money to finance office construction.
Be sure to consider all these options before you throw the towel in and decide to give up on your new office construction.
Do you need more help finding the money to help you with other aspects of building your business? If so, we’ve got lots of great resources available on our site.
Check out the Financial Services section today for more great articles on raising money and managing your money as a business owner.