For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it?
Luke 14:28 KJV
This Bible verse is not about Jesus giving real estate development or small business financial advice but for the sake of some entrepreneurs I wish He would have. Sadly, it is not an infrequent occurrence that CEDF’s lending department receives applications related to stalled projects. The owner thought they had enough money but they ran out because of unforeseen responsibilities imposed by government regulations, increases in the price of equipment or materials, delays in construction, etc.
Sometimes these situations are obviously foreseeable, some are pure bad luck. But the common factor in three examples that I have heard about lately, and the element that makes these head-slappingly tragic is that a lease was signed before a carefully considered set of cost estimates was totaled.
Of course, you might say, you have to sign a lease and get possession of the space in order to start building, and only then do you discover the overruns.
But the scenarios I’ve seen aren’t the bad luck kind, they’re the reckless, hope for the best, “I’m sure we can finish for cheap” sort of problems. And they come up frequently.
Something in the impatient psyche of an entrepreneur makes them believe that the location they have chosen is the last one on earth suitable for their project. And naturally the landlord or leasing agent has revealed that several other serious parties are ready to commit and snatch the opportunity away. Indeed, they will never forget this one.
-- Frederick Welk
CEDF Business Advisor