Should I Borrow Money To Refurbish My Business? Why?

should i borrow money refurbish business loan renovate company

The year 2021 may seem like a strange time for renovations to your business. After all, many businesses are happy to have just survived the pandemic and can’t hope for too much more. The idea of borrowing money to do so may not seem wise, especially if you are going to need to take a loan with a high interest rate. 

However, in many industries, the aesthetic of your business is not at all superficial. Rather, it is what draws patrons in and provides comfort. A restaurant with torn and dirty-looking booths, for example, is not going to be popular, especially in a time of hyper-awareness of hygiene

To help you decide whether you should be thinking about refurbishing your business, we’re going to take a look at what should be your priorities. We’re also going to discuss the concept of fit out finance, and whether it is any better than other private small business loans. 

When Should I Refurbish My Business? 

There are no set rules as to when a business needs refurbishing. In some industries, it is simply far more important than in others. While the offices of an online company may be seen only by employees (who might well be working from home in 2021), a shop is going to be seen by hundreds of paying customers every single day. 

However, there are some pointers that apply across the board. Consider the following questions: 

● Is your establishment still comfortable for your patrons? 
● Would you be enticed to come inside if you were a potential customer? 
● Are your employees comfortable and proud of their workspace? 
● Does your establishment feel clean? 

If the answer to any of the above is no, you should seriously consider refurbishing your business. Successful businesses feel like positive spaces for both clients and staff. Plus, a lack of cleanliness, even if it is only perceived, can be a deal-breaker for potential clients post-COVID. 

That settles the question of when you have no choice to refurbish. But at what point should you ideally start thinking about it? 

For many businesses, the answer will be around the time your maintenance costs begin to really build up. Things have started breaking down and piecemeal fixes are getting expensive and don’t look great. If this is happening in your establishment, it is worthwhile considering a refurbishment simply to save money you'll inevitably spend on fixes that don’t actually improve your space. 

Now, what happens if you don’t have the cash on hand for a refurbishment? Is it wise to take a loan? If so, what kind of loan should you take? 

Should I Take Out A Loan? 

For some companies, taking out a loan is a terrible idea. Companies that have no assets to serve as security and cannot get a loan from their bank will struggle to find a loan that is not exploitative. Their options may be limited to lenders who charge massive interest rates. Many of these companies are predatory lenders, who thrive on desperation rather than on the success of their clients. 

While it may feel like you have no other choice but to take one of these loans, the reality is that the loan itself might hasten the end of your business. You'll briefly have the finances you need, but before long you'll be left in a significant amount of growing debt to the lender. 

However, many companies considering refurbishment are not in this situation. If they own the building they are refurbishing, it can serve as security on the loan. The interest rate will be much lower and there will be more trustworthy lenders to choose from. 

This is where the concept of fit out finance comes in. 

What Is Fit Out Finance? 

The type of loan known as fit out finance covers the amount you need to refurbish your establishment. Many companies use fit out finance to fit out their place of business in the beginning. Few small businesses are able to afford the costs of starting a business from scratch, especially if they are already using bank loans to pay for the building itself. 

Fit out finance is not a one-size-fits-all solution. Rather, different private lenders provide various options. Businesses can choose to take out a business line of credit, for example. This is similar to a credit card, in that you have a fixed interest rate and only pay for what you spend. 

Alternatively, you can get equipment financing if your company needs expensive equipment for day-to-day purposes. Equipment financing uses the equipment itself as security, making lower interest rates available. 

What Do I Need To Know Before I Apply? 

If you have decided that your business needs fit out financing or a similar solution, you are going to need to do some basic research. Draw up a budget that includes the bare minimum you will need in order to function. Draw up a separate budget that includes what you would ideally have for your refurbishment. 

Also, consider which assets you can use for your security. If you decide that you simply cannot risk the assets you have, this is an indication that you are not certain you can afford financing. Either consider getting a smaller loan, or take an alternative route. 

The good news is that from this point, the process is fairly easy. You can do it all online through a number of private lenders. 

Before you do so, however, search for reviews of these lenders and take any accusations of predatory lending very seriously. If you get a loan from a predatory lender, the odds are stacked against you no matter what position you are in. 

Fit out financing may be exactly what you need to revitalize your business. Do the math and make sure you are in a position to succeed with a private loan for company renovations.

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