Construction projects require a lot of thinking and decision making before they can materialize. One key factor that determines whether a project will start at all is the financing of the project. Many vital aspects have to be considered and be accounted for before a business can acquire funds from lenders. The following are some of the tips you can put into use when seeking financing for your new office building
Conduct a Check on Your Financial Health
Conducting an in-depth analysis of your finances helps reveal if you can afford to go ahead with the project. Consider factors such as the business’ income, assets, debts, and recurrent expenditure. Future potential income and expenses are also necessary when deciding on financing a new office building.
Seek Professional Help
Starting with a good business plan helps you to come up with realistic income projections, which in turn helps convince investors of your ability to handle the project efficiently without risking substantial losses for the company. It is advisable to seek a banking expert’s help to determine the feasibility of your project, and how much funds it will require ensuring completion of the project. By showing enough profits in a healthy balance sheet, companies looking for financing stand a better chance of being funded.
Some banks, like LCNB National Bank, offer commercial construction loans that cover construction projects from the start to completion, with a variety of financing options from which to choose. Terms provided for permanent financing vary but can be up to 25 years. It’s important that you take into consideration what you will need to do in order to pay back financing.
Formulate an Emergency Funds Plan
In any construction project, unpredictable situations such as design modifications, unaccounted landscaping costs or moving costs often make it difficult to predict the actual cost of a project accurately. Therefore, when sourcing for a project’s financing, it is good to have an emergency fund system that covers any extra charges. The fund may amount to approximately 10% of the total cost. Making room for this prevents the stalling of the project when you start running low on funds.
To sum it up, construction of an office building requires prompt planning to achieve success. Unaccounted costs may lead to stalling of a project. The inability of a structure to generate enough income to service construction loans can also prove disastrous. It is therefore essential that you really do your research when setting up financing.