What You Should know about Buying vs. Leasing Commercial Real Estate.
The Pros & Cons
Some businesses start small, in a home office, basement, garage, or kitchen. Many businesses grow to operate out of commercial spaces such as flex/industrial spaces, storefronts, or offices. If you’re launching a new business, or expanding an existing one, you may have to decide whether to lease or purchase commercial real estate. There are pros and cons to both leasing and purchasing, so it is wise to review the benefits before making your decision.
When purchasing a property, you can either pay cash upfront or finance it with a loan. You could consider a loan guaranteed by the Small Business Administration (SBA) as a first option. The SBA offers two loan programs that can be used for commercial real estate: 7(a) loans and 504 loans. While 7(a) loans are general purpose loans, 504 loans are specifically designed for the purchase or refinance of commercial property.
With a lease, you rent the property for a set term, at which point you must renegotiate if you wish to continue using it. Several factors go into choosing the right strategy for your business, including cash outflows, recurring costs, tax implications, property value, business equity and more. The following are pros and cons to consider when purchasing commercial real estate.
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