Should I Buy Business Premises?

Posted by Fusion Finance on 11th December 2019 -

The majority of newer businesses do not have the resources required to buy their business premises, meaning that renting is the only logical option. However, after several years of successful trading, it does sometimes make sense to consider buying business property rather than paying rent to a landlord every quarter.

What are the advantages of buying a commercial property?

Owning your own business premises means that you are no longer subject to the whim of your landlord, who can decide to raise your rent or sell the property. Having to relocate a trading business can be very disruptive and expensive, particularly if your company has spent a significant amount of money customising the premises.

Other benefits of buying business premises include:

• Often paying less in loan repayments than you would pay in rent as a consequence of the current very low-interest rates.
• Profiting from any increase in the value of the property if you choose to sell.
• Having far more control over how the premises are used and being able to change them as needed, subject to planning controls.
• The option to sublet part or all of the premises if your requirements change.

There are also disadvantages to purchasing business premises, and these can include:

• Having to find the deposit for the commercial loan. This can be 20 to 30% of the purchase price and will tie up capital that could be better invested in the business in other ways.
• Paying other purchase fees such as stamp duty, legal and valuation fees.
• The risk that monthly loan repayments might rise if base rates increase, although a fixed-rate product can be used to eliminate this risk.

However, before you decide on making such a significant purchase, it is essential that you always take legal and tax advice to fully understand how the investment could affect your business.

What sort of deal could I get?

If you are running a successful trading business and are paying rent to a landlord on-time, there has never been a better time to buy your own business premises. Banks and other lenders are very keen to lend to trading businesses that have a profitable trading history of two years or longer.

Interest rates start from as little as 2.75% per annum with some lenders even offering interest-only payments if that is what the business needs. Terms typically range between 10 and 20 years although some specialist lenders will lend for up to 30 years if the case justifies it.

So if you are considering buying business premises, then please get in touch. Our advice is offered freely, in confidence and without obligation.