Tips from our SBA Program Director

Top 3 Tips for Expanding Your Business

Congratulations! You have started a small business and it is successful. Now customers are asking when you are going to offer additional product selections or get a larger space. If your business expansion will require a new space and you choose to lease a location, it requires some planning. These are a few tips and next steps from our experienced SBA professionals on helping borrowers through a leasehold improvement loan.

1. Find the Location:

Once you have a vision for your ideal new location, capture and specify those details. Decide how much square footage is needed, what it should look like, and where you want to locate. Keep in mind, finding that ideal space can be challenging and expensive in a high visibility location. You may want to enlist the help of a local real estate broker who has experience in leased space to find that perfect spot at a cost you can afford.

2. Plan the Space:

Once you find the ideal location and negotiate lease terms, obtaining architectural plans is normally the next big step. You may be able to have a general contractor review the space and obtain a range of costs to improve the space to your needs. However, plans will be required for them to formally bid out the project. This often takes more time than anticipated, so make sure the landlord is willing to be patient while you determine the cost of the project. Also, the cost of leasehold improvements can be higher than anticipated. Finally, once the cost is determined and you are ready to start construction, the builder needs permits before any work can be done. Asking about the timeline for those steps and a start date for work is important because lenders like to time a loan closing based on a start date as close as possible. 

3. Obtain a Loan:

SBA loans require the lender to list out the uses of funds and stick to those figures during the disbursement process. Getting accurate quotes for the leasehold improvements, required equipment, inventory, and working capital are critical in helping the lender make a credit decision and reserve funds with SBA. Lenders may be willing to determine their level of interest in a project based on estimates, but you will need to tighten that up before they finalize any approval of financing. 

If you are considering a project to renovate a leased space/existing building or construct a new facility, it is worthwhile to speak to your lender as early as possible. Plan to discuss the requirements of obtaining financing, the process to close, and the process of funding. Usually, lenders will have a prescribed funding procedure for an SBA loan to ensure the terms and conditions of the loan are followed correctly. 

Communication is key for all SBA loans, but especially when they involve any type of construction. Making sure the lender, the general contractor, and the borrower are on the same page is critical to a successful outcome.  

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