When making the decision to get out of the rent-paying game and become a building owner, the first step is to decide if you wish to purchase an existing building or start from scratch and build your own.
It’s not an easy decision. However, if you can’t find an existing facility that meets your needs in the location you desire, the alternative is to build. The first step you should take is to enlist the help and advice of experts in the finance and construction fields. There is a definite timeline to follow and a few precautions you should take to protect yourself and make the entire process as smooth as possible.
Consider these helpful hints:
Financing: Before you start scouting for a piece of property or an available lot for your business, find out what size construction loan you can qualify for and any restrictions or limitations you may have to abide by. With that information in hand, it’s easier to find the land you need before making an offer. Never make any commitments to purchase and build or close escrow before you have solidified your business financing needs. A common reason that small business owners cite for not building or owning their property is a lack of funds. In addition to conventional loan programs, U.S. Small Business Administration (SBA) Guaranteed Loans can help address that issue. SBA loans can provide high-leverage financing with low down payments for qualified borrowers.
These loans can be used for a variety of purposes, including real estate purchases and new construction.
An additional benefit of SBA loan products is that a small business owner can get one loan to cover the costs of building, equipment purchases and working capital, with all the fees and costs determined and disclosed prior to closing. This means you’ll only have to sign one set of documents and attend one closing.
Permits and Zoning Requirements: Once you find a spot to build, check the zoning restrictions and the permitting process. If it is properly zoned for your needs and building permits are attainable, it’s now safe to make an offer.
Remember, it can take up to three months to secure the necessary building permits. Make sure the closing is contingent on proper zoning and that any rezoning or remapping is complete before you sign on the dotted line. Your broker should write this into the deal. If they don’t or refuse to, look for a new broker. It’s that important.
Architects: With financing information in hand, working with an architect becomes much easier. You’ll know exactly how much money that’s available for your business to spend, and the architect will have guidelines and be able to stay on budget. An architect may need four to eight weeks to complete the plans, so budget your time accordingly.
Contractors: Be sure to take time to identify and hire the best contractor you can afford and get several bids on the project before making a decision. Don’t make your decision based solely on the lowest bid.
As part of your review process, check references, financial statements, proof of liability and worker’s compensation insurance.
In addition, contact the state contractor’s licensing board to see if any complaints have been filed or actions taken against the contractors you’re considering.
Finally, make sure your contractor and architect meet each other early on so they’re in agreement on the timeline, budget and any other special needs or circumstances.
Construction projects can be stressful and time consuming, yet with a little patience and prudence, building your own facility can be one of the wisest decisions you can make.
Working with competent professionals will go a long way toward making your project a rewarding and profitable experience.
This Tip of the Week was written by Tawnie Nelson, Wells Fargo’s Small Business director for Southwest Washington and Oregon. She can be reached at 360.759.4820.