THE PROS & CONS: LEASING PROPERTY
Another option for funding business premises is leasing. In particular, an operating lease, where your business rents premises, but doesn’t own the property at the end of the lease term. All terms are negotiable including term of years, break clauses, termination rights, rent, rent reviews etc.
If you are looking to lease/rent ensure you take legal advice to help you negotiate the terms before signing the lease agreement.
Leasing a property is often a quicker process than buying one, meaning you can relocate quicker
You won’t have to tie up a large amount of cash in the form of a deposit
A fall in property values won’t affect you and could even give you grounds for rent reductions
Tax liability - All lease costs are off-set against profits, whereas only the interest element of a loan repayment reduces profits
You may be liable for repairs depending on the conditions of the lease
Rent can increase with little warning
You won’t benefit from increases in the property value
Exiting a lease before the end of the term can be expensive
You may not be allowed to make alterations to the property to meet business needs - dependent on terms and conditions
This document is intended to be an aide-mémoire to help you consider different forms of finance and which ones might be appropriate for your business; it is not a comprehensive guide to all forms of finance. There could be different tax and legal implications associated with different forms of finance. Professional tax and legal advice should be sought to prepare for these different forms of finance.