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Enough Already?

Determining how much money you need for an equipment loan

Q: To fulfill a contract my business just landed, I must buy new equipment. How can I be sure I borrow enough money from the bank?

A: There are a lot of things to consider when approaching the bank about an expansion loan. And if you don't ask, you won't get. So add up all the potential costs-such as closing costs, installation fees charged by the vendor to put in the equipment, construction costs to integrate the equipment into your plant, and working capital needed to support the expansion prior to getting paid by the customer and the like.

Work closely with your accountant to calculate the costs and estimate the capital you need to grow your business. Take this information to your lender, and ask him or her to help you structure a loan that meets your cash-flow needs. Get as much as you can upfront, because it's easier to get cash the first time than to go back for a supplemental loan.


Doug Hood is founder and president of Rainmaker Capital Corp. Send your questions and comments to doughood@rainmakercapitalcorp.com

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This article was originally published in the June 2001 print edition of Entrepreneur with the headline: Enough Already?.

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