Operating a business invariably incurs costs and for some, the burden of rising rents can be heavy. Therefore many businesses look to combat this by purchasing their own premises – a strategy that can make a lot of commercial sense for a number of reasons in addition to having control of the business premises and the cost.
Not only is this a way of eliminating rental payments, there is the added appeal of owning the asset. Commercial mortgage rates can potentially be cheaper overall than the cost of renting from the outset. This may possibly result in a boost to cash flow.
But whilst there are benefits with securing your own commercial space, there are also limitations that need to be considered. Commercial lenders typically require the buyer to provide a higher percentage of the purchase price than in a residential purchase. This can tie up funds that could be used elsewhere in your business.
The business will also be tied to that property for the foreseeable future, and thus considerations such as future suitability and changing workforce will factor into the decision-making process.
As with any business decision there are benefits and drawbacks with purchasing your own commercial space. One of the biggest considerations is to secure the right finance. Commercial loans are enumerated in terms that are much shorter than residential mortgages and have a far greater variety of characteristics when it comes to reviewing periods & features that influence the cost of the finance, both at establishment and dynamically over time.