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3 financial questions to answer before opting to expand your company

Your company is growing, and that’s a great thing. Revenues are up, your client base is expanding, and you are hiring new employees to meet rising demand. And as your business grows, you are experiencing growing pains with your current facilities. The time has come to expand your office or building to have room for the growth of your company and better situate the business to handle future growth.

It is important that you stop and take a moment to answer a few financial questions before making an addition to your current space. Before you begin this exciting project, take some time to consider a few finance tips before construction.

  1. How healthy are our finances?

The perfect starting point for any construction project is your company finances. Your level of financial strength will determine not only the viability of an expansion project, but also the need for an expansion project. As you look through your company budget, look at both the short-term and long-term cash flow. When you consult the financial gurus in your company, as well as outside financial advisors, ask some the following questions:

  • Are we operating consistently in the black? Or consistently in the red?
  • How many of our current clients/contracts are long term? How many are short term?
  • What is our current credit rating? Do we have sizeable loans outstanding?
  • What is the status of your accounts receivables?

The answers to each of these questions will help your company determine whether or not the time is right to proceed with a construction project. Looking at the temporary and long-standing fiscal forecast for the company will help determine if you need an updated facility.

  1. How will we secure financing for the construction project?

Odds are you don’t have the cash on hand to pay for a construction project to expand your business. The key financing option for construction projects are business loans from banks and other loaning institutions. Before sitting down with contractors, determine your lending capacity.

If your company has a good credit rating and no major loans outstanding the odds are in your favor for receiving the loan you need for your building project with a fair interest rate.

  1. Which features are needed and which features are wanted? 

With the construction of a new facility, you may feel that now is the time to give your employees all of the nice things you don’t have in the current building. However, all those little extras can add up and balloon your budget. During the initial planning phase, identify the features and amenities your company needs, and keep a separate list of features that are wanted.
Take the time to respond to all of these fiscal questions before building new or expanding your present facilities. Addressing all of your financial concerns prior to talking to a construction specialist can prevent surprises and avoid costly mistakes.


Dennis Ayemba
Country/ Features Editor, Kenya


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