Building out your first or next office space or retail location is exciting, complicated, and painstakingly difficult. Identifying the right location is only one small part of the process.
As part of every new commercial lease, landlords work with renters to build out the physical space to be suitable for the business. Landlords may also pay, but most times renters have to pay a significant amount of cash to convert their newly leased space. In some instances, tenants may hire a licensed contractor to build out their space while the landlord reimburses the tenant.
Whatever the situation is, the way most businesses finance their build outs is broken and outdated. And regardless of how many times you’ve done this before, the pain of negotiating with the landlord and effectively financing the perfect space is ubiquitous.
That’s where location finance comes in.
Location finance refers to how businesses plan, manage, budget, and execute their commercial build outs. With 20% of small businesses failing in their first two years, decreasing that rate is as important as ever.
The success of your business starts before you’ve even opened the doors. From traditional bank loans to non-traditional funding, there are several ways to effectively master location finance.
Running a business has several moving parts and constant costs. To get an idea of how much you’re able to spend on a new location, you need to understand the process of how build outs are financed.
There are additional factors to consider. Most of the time your brand will not be aligned with the look and feel of an existing commercial space, so you have to be prepared to spend more on renovations. If you're looking for visibility, you should be looking to upgrade and beautify your space.
Other costs to consider before moving into a new commercial space:
If these numbers are starting to add up, don’t worry. There are numerous ways to gain the capital you need to claim your location.
Let’s take a look.
One of the most common loans for small businesses is the Small Business Administration Loan (SBA). With an SBA loan you can purchase existing buildings or land, construct renovations, buy new facilities, and obtain long-term equipment.
A downside to SBA loans is that the approval rate for new businesses is low and the process can be lengthy. However, it’s a great option for those in need of long-term loans, large sums of money, and people who have good credit and can give a personal guarantee.
Are you a new business looking for the right community? Crowdfunding is a great way to get the name of your business out there, while attracting the right customers and gaining donations.
In return, you can offer events, discounts, merchandise and more based on the donation value. Once you’re ready to open your business doors, you’ll have happy supporters already.
You can find investors to help fund the heavy up-front costs of opening up your new location. Venture capital typically focuses on high-growth companies and invests capital in exchange for equity. They usually do not like financing real estate, so you could be in for a long ride.
Location finance companies like Aikito can help simplify the financing process of your commercial build out. For professional offices, retail businesses, and medical offices alike, a build now, pay later solution can amortize your cost so you can save capital up-front and build with the right kind of financing with low fixed payments once you are generating revenue.
“Location, location, location” is a common saying and it’s not exclusive to the housing real estate market. When looking for a commercial building for your business, location should be your number one priority.
The location of your company, or its physical place, is one of the defining factors of your business’s success. A good location can set you apart from your competitors, attract your target audience, and help you grow.
The right location also:
When looking for the right location for your business, you may spend more time viewing spaces that you may have originally planned. But the process is worth the wait.
To help you narrow down your search, take a look at these three factors of a great location.
1. Decreasing Unemployment Rate
A decreasing unemployment rate in an area indicates a growing and booming economy. A region with a low or decreasing unemployment rate hires more people, retains talent, and continuously opens new businesses.
An increase in business establishments may sound like competition, but it’s one of the common indications of financial well-being. A plus for your new business!
There’s a common misconception that all good locations for commercial use are in cities. Don’t make the mistake of overlooking neighborhoods with growing entrepreneurial rates. You may find the gem you’ve been looking for.
This goes without saying, but if your customers can’t access or have a difficult time locating your business, you’ll lose customers - fast.
To determine if your business will be accessible to customers, ask yourself:
As with any brand, nurturing your relationship with your customers is key to retaining them. The type of location you choose will reflect your brand and attract the right customers. Similarly, the type of community you locate in will determine the success of your business.
For example, a neighborhood with a tight-knit community can serve as a way to promote your goods and services. If community involvement is critical to your brand and business, look to neighborhoods that would participate in events, promotions, or volunteer opportunities. Depending on your target audience, your business’s location is going to have to go to them.
Other factors to look for when searching for a commercial location include:
Not ready to burn through all your cash just to move-in?
Traditional commercial real estate deals lock up precious cash and waste valuable time on lengthy planning and builds. Aikito built a better way, with zero upfront capital requirements and smooth transactions that puts your dream space within reach.
With Aikito, now everybody can have a beautiful, sustainable workplace – so you can invest in building your business, not just your footprint.