As a new business should we buy or lease our premises?
For many small business owners, the question of whether to buy or lease property can be a confusing issue. The natural answer depends on the particular situation. The truth is, when it comes to this important business decision, there really is no one ultimate solution. Of course, if you are lacking sufficient capital to purchase a commercial building, then the decision becomes an easy one. But leasing may be the smartest move anyway: Statistics show that most new business owners start out by leasing space until the business get on its feet and your business starts operating at a profit.
The other benefits are:-
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Flexibility. One obvious advantage to leasing property is the flexibility it provides. When the lease is up, you can easily relocate to another property that better suits the needs of your business and your budget.
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Deductible payments. With a lease, rental payments are deductible as operating expenses within your accounts.
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No mortgage. Not being locked into a mortgage loan allows you to free up cash and put it where it is needed. This is especially helpful for new business owners.
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Negotiable rates. If there is a good supply of stock it may be possible to negotiate a lower rent and other incentives.
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Limited Capital Upfront. When you purchase a building, you typically pay 20% to 25% of the price and then mortgage the balance. When you lease a property, you need only pay one or two months of the lease value before moving in, which allows other capital to be used for the business to get established.
Whether you choose to lease or buy, make sure the premises are suitable for your business activities both in the short and medium term. Always seek good independent property and legal advice before making any firm commitments to lease or buy a property.
