financing, growthMy business is currently operating out of a large garage/shop building on our personal property. It’s been great to have that available because it means the business doesn’t have to worry about rent/mortgage for the time being.
But it’s growing, and I expect it to keep growing, and it likely won’t be too long before I outgrow the building we have.
That’s a great problem to have, but I also don’t want to be caught with my proverbial pants down and be unprepared when we get there.
I live in a rural area, and there isn’t much available here for rent or purchase that would suit the needs of my business. So I’m considering either buying land (which is plentiful and relatively inexpensive here) and building on it or moving to a less rural area and either building or buying a building there. Much of that decision will probably end up depending on the cost differences between building vs buying and modifying it to meet my needs.
But my question is two-fold:
First, how hard is it for a fledgling business to get a loan to build (or buy?) a facility for light industrial processes (small scale manufacturing operations) and warehousing?
Second, what things can I do to slant the odds in my favor?
Obviously having a successful business is going to help, and being able to show growing revenues and responsible spending will help. But by nature of being a newly established business, those records don’t go back very far - will that be enough?
I know with a home loan they say they want you to be able to show a stable income for at least 2 years - what if my business is younger than 2 years old when I hit that space bottleneck (and ideally I want to start this all in motion BEFORE hitting that bottleneck since it will take time). Are the rules different for businesses, or do I need to seek a different type of funding?
Distractions are the enemy of growing businesses. Your likely future space shortage is a pretty small distraction compared to becoming a property developer.
You’ve said there’s not much to buy or rent that’s local to you. Well, find some properties that come close to meeting your needs and ask who built them and (if it’s different) who owns them.
With a little luck you may find someone who is willing to take some of your risk and most of your hassle away, in exchange for an appropriate deal.
And there are lots of possible shapes for that deal, which could see you ultimately renting, owning, renting with an option to buy, sharing equity, sharing a building, or any one of a wide range of outcomes.
Time is on your side. So invest some of it in purposeful conversations exploring possibilities, then in six months you’ll be able to make a better-informed decision.
I suggest you not to take a loan but find an alternative way to fund your needs. You can find some way to make a presale of your product. Cash is the King. Consider some crowdfunding platforms for presale, like Kickstarter or Indigogo.
Don’t take a loan unless you absolutely sure you have enough sales to pay it!
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