When Considering a Construction
Project, Consider These Helpful Hints
When making the decision to get out of the rent-paying game and move to the ranks of building ownership, the first step is to decide if you wish to purchase an existing business or start from scratch and build your own. Not an easy decision. However, if you can't find an existing business for sale that meets your needs and is in the location you desire, the only alternative is to build.
If you find yourself in the position to build your own facility, the first step you should take is to enlist the help and advice of experts in the construction field. Next, there is a definite time line and a few precautions you should take to protect yourself and make the entire process go as smoothly as possible. Consider these helpful hints:
Financing: Before you start scouting for a piece of land or an available lot, 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 and make an offer. Never make any commitments to purchase and build or close escrow before you have solidified your financing needs.
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, and if they don't or refuse to, look for a new broker. It's that important.
Architects: Again, with financing information in hand, working with an architect becomes much easier. You'll know exactly how much money you have to spend and the architect will have guidelines and be able to stay on budget. Be forewarned: It can take four to eight weeks for an architect to complete the plans. Budget your time carefully.
Contractors: Hire the best contractor you can afford. Get several bids on the project and don't make your decision based solely on who's cheapest. Ask for and verify references, financial statements, proof of liability and worker's compensation insurance. Finally, check with the state contractor's licensing board to see if there have been any complaints filed or actions taken against the contractor. Make sure your contractor and architect meet each other early on and each understands the time line, budget and any other special needs or circumstances.
The most common reason small business owners cite for not building and/or owning is the lack of funds. However, new conventional loan programs such as TMSDirect SM as well as U.S. Small Business Administration (SBA) Guaranteed Loans can provide high-leverage financing with low down payments financing for qualified borrowers. These loans can be used for a variety of uses, including real estate purchases and new construction.
An additional benefit of these specialized 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 close one set of documents and attend only one closing.
Construction projects can be stressful and time consuming, but 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 ways toward making your project a rewarding and profitable experience.
David W. Moore, Jr. Norfolk, VA (757) 640-7592
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