According to IBIS World, the commercial property remodeling industry is worth $35 billion in 2019. Is the office renovation cost you are about to incur giving you sleepless nights? Do you want to improve your workspace and have a pleasant working environment but falling short on monies?
It is a dream of everyone to work in a comfortable, well-done office. Handling your daily activities in a spaced environment feels enjoyable and satisfying.
Office renovation is a cool but costly idea. With limited financial resources, paying for office renovation feel confusing and stressful. However, there are different methods you can exploit to finance your office renovation.
This article guides on financing for office renovation without suffering a financial hitch. Read on.
Creating a Budgeting for Office Renovation
When renovating your office, it is essential to develop a workable budget. Several factors determine the size of your budget. Besides, it’s key to evaluate all the costs that you are likely to incur.
Below are the costs to out for during office renovation;
- Vendor costs
- Soft costs
- Hard costs
- Project management fees
These are the cost that you are likely to incur. Each cost from the other in different ways;
1. Hard Costs
These are costs of physical renovation of the space. They include the building of walls, air conditioning, flooring, etc. these costs make up the large percentage of construction costs. Typically, hard costs make at least 70% of the renovation cost.
When budgeting for hard costs, consider the following;
- Electrical relaying
- Painting and carpeting
- Walls and framing
- Doors and windows
However, these are not only the hard costs that you will incur. Hard costs vary a lot, depending on the style and quality of finishing.
2. Soft Costs
These costs do not include anything concerning physical space. They are the expenditure on service for renovation. Also, hard costs account to around 10% of the total project.
Some expenses that amount to soft costs include;
- Legal fees
- Architectural design
- Inspection fees
Also, these costs vary depending on the complexity of the project. Soft costs are easier to estimate compared to hard costs.
3. Vendor Costs
Besides the regular expenses, there are other types of costs you are likely to incur. Vendor costs include security fees, signage, moving, and cabling, among others. They are sorts of miscellaneous expenses and that you end up paying for the project.
4. Project Management Costs
Should you choose a project manager, you are likely to incur a project management fee. The project management fee takes about 4% of the total project fee. Although this expense may look unnecessary, the project manager saves you money on overall expenditure.
5. Contingency Fee
This cost is budgeted to cover for unexpected expenses that might occur in the workplace. You will likely incur about 5-10% of the project fee on undetected expenses. To avoid inconvenience during an office renovation, include this cost in your budget.
Seeking Financing for the Project
After you have come up with an all-inclusive budget, the next step is seeking financing. This is perhaps the most challenging part of undertaking the project. These methods will help you pay for the office renovation;
1. Financing Renovation Cost From the Office Kitty
This is always the primary source of financing. You can set aside money specifically for an office renovation. If you own an office or organization, office renovation costs can be included in the normal expenditure.
Self-financing is probably the best option to go for. The money used for the office renovation can be billed as an expense to the company. Internal financing is cheaper and more flexible because you can flex on spending.
2. Seeking Commercial Loans
Commercial renovation loans help you complete the office work without much struggle. You can pay up for the commercial loan over some time to avoid draining your accounts.
Seeking financing from reliable lenders not only helps you pay for the renovation but also assists in project management. You can also check this webpage for more loan options.
Below are the available office renovation loans to consider;
I). Bank Loans/Lines of Credit
Your bank is probably your primary source of financing. The banking institution that you always bank with can help you secure some funds. The amount which the bank is willing to offer depends on your credit rating and ability to pay.
With a good credit rating, your line of credit will offer you a lump sum to upgrade your space. What you need to do is fill the essential paperwork, and everything will turn out perfect.
II). SBA 504 Loans
This is a government-backed loan that offers you credit at low interests with long repayment terms. This loan is perfect for extensive renovation and modernization of office space.
This is purposely for modernization, improvement, and construction of new facilities. If you are facing a hard time or having challenges during property renovation, this loan is helpful. To secure this loan, you have to pass the eligibility criteria.
III). SBA 7(a) Loans
This loan is different from the 504 one because it can be used for other purposes besides renovation. If you need funds for extra work besides office renovation, this is the most suitable option. These loans also offer long terms of and low-interest rates.
To qualify for this loan, you’ve to meet the SBA’s small business qualification and a credit score above 650.
IV). Equipment Financing
If you don’t need a full-scale renovation, you can opt for equipment financing. This loan applies for purchase, leasing, and upgrading of office equipment. If you can finance the space upgrade on your own, this loan will help you settle the office equipment.
This is the most suitable loan for an office equipment upgrade. It finances the purchase of desks, electronics, lighting, coffee machines, dispensers, etc.
Renovation Cost – The Bottom Line
Paying renovation cost can be daunting, especially if you don’t have enough finances. However, the above options will help you upgrade your space entirely. Follow the due process, and you won’t have much problem renovating your workplace.
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