Finding Premises for Your Start-up: A Guide

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A huge number of businesses begin at home because of the reduced costs and, let’s face it because new enterprises are always a risk in the beginning. However, as businesses expand and cash flow becomes healthier, it’s natural to outgrow the home set-up and to look around for alternative options. But when the time comes to take the step into commercial premises, how can you be sure you’re making the right choices for your situation? This guide outlines the key factors you need to consider when finding premises for your start-up, as well as the pros and cons of renting or buying commercial property.

How much capital do you have?

You will need a large amount of capital in order to buy premises, and most business owners will also need to take out a mortgage. This is a big financial commitment and can affect your cash flow and how much credit you will have access to for continued growth. Renting premises can mean you have more control over your cash as the payments will be fixed for the term of the lease while mortgages tend to fluctuate with interest rates. However, buying premises is certainly an investment, while renting is essentially paying for someone else’s asset. Whichever option you choose, you will also need to consider ongoing costs like business rates, utility bills and, if you are buying, stamp duty.

How much risk are you willing to take?

Buying a property is, in many ways, a riskier option than renting. Before you purchase any property you need to carry out a full structural survey to ensure it does not have issues which could be dangerous or costly in the future such as asbestos. You can do this by contacting professionals like Gerald Eve chartered surveyor. When you are the owner, you will be responsible for fixing issues like a broken heating system or a leaking roof while the landlord is usually responsible for this in a rental agreement.

Have you considered the future?

When you buy a property, you can decide how to renovate or redecorate without having to ask for permission, unless it’s a significant structural change that will require planning permission from the local authority. If the business expands and needs more space in the future, owning your own premises can give you the flexibility you need to adapt. On the other hand, renters would need to complete their lease and then move on to bigger premises. Some rental agreements will allow tenants to make changes as long as the premises are returned to their original state at the end of the tenancy.

If you are considering buying premises, it’s best to aim for property in a growth area in terms of population. The area should then become more attractive for prospective buyers in the future which should drive up the property price. Renters should begin with short-term leases which offer more flexibility in terms of needing to expand or relocate in the early years of growth. Be sure to check how rent is reviewed as it’s best to know if you’ll be facing an annual increase.

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