Is it better to buy or lease your business premises?

Choosing the right premises is one of the most important decisions to make as a business owner. If you operate a shopfront or have clients coming to your workplace, you want a premises that’s well-located, professional and fit for purpose. It needs to be convenient for both you and your employees, with room to expand if your business is growing. If you run a manufacturing business, it’s essential to find a premises that’s big enough for your operations and has good access for loading and unloading products and materials.    

If you find the perfect place, is it better to buy it or lease it? The answer depends on a number of factors.  

Buying commercial premises 

There’s a lot to be said for owning your business premises. It’s an investment in your business and your future. And once you’ve built up equity in the property, you can use it as security for other loans that can help you grow your business. You will have control over the asset and can change the layout and internal fit out to suit your exact needs.  

However, buying your premises can be an expensive exercise with significant upfront and ongoing management costs, and if there’s a possibility that your business will outgrow the premises at some point in the future, this may not be the right approach for you.  

Leasing commercial premises 

Leasing your premises can be more affordable in the short term. It means you won’t have a large portion of your business capital tied up in the property, which could give you the opportunity to invest more money into growing your business. If you’re not sure how big your business will grow, or if there’s a chance you may want to move to a new location soon, leasing may be a more cost-effective option. 

It’s also worth considering the disadvantages associated with leasing. Firstly, leasing doesn’t have the same security or control as owning your own premises, because your landlord could sell the property or increase your rent at any time. If this happens you may have to move to a new premises at short notice. Secondly, you’re also paying off someone else’s asset rather than building one for yourself. 

How a broker can help 

Tapping into your broker’s commercial finance knowledge and experience can help you grow your business. After all, no one is better placed to understand your needs than another business owner. Your Mortgage Choice broker can help you work out whether buying or leasing is a better option for you. They can also let you know if you’re eligible for any government incentives for small or medium businesses.