The choice of commercial premises is a decisive choice for a company, in particular for a company that is starting up and choosing its first premises as Tim Archibald explained. The question of the purchase and the mode of financing of the premises is also very important: should we prefer a rental or purchase? In case of purchase, Tim Archibald, Christchurch is sharing which mode of financing to choose, why, when, with whom?
There are different ways to finance the purchase of commercial premises. These financing methods can be divided into two categories: internal financing methods (financing the premises from own funds/company funds) and external financing methods (financing the premises from an external source, as in the case of a loan).
We will support you in your decision by explaining these different financing methods for the purchase of commercial premises.
Why Prefer Buying to Renting?
First of all, the question of the purchase of commercial premises is not self-evident. Many companies prefer to turn to the rental solution. Both solutions have different advantages and disadvantages.
The Advantages of Renting By Tim Archibald
Generally, a start-up company is more likely to turn to rent premises. And for good reason, it is the rental of commercial premises that seems most suitable for small businesses that are starting up and have development prospects by Tim Archibald Property Developer.
Renting makes it possible to envisage an evolution: it is easier to change premises when you are a tenant than when you are an owner. It is also a more affordable investment for a company that has not yet stabilized its monthly turnover.
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The Benefits of Buying
It is the more mature companies that will turn to the purchase solution. When the company is already stable or does not intend to move or expand over the long term, the purchase is a guarantee of stability and security.
Buying your commercial premises is both a practical and symbolic act. Practical, because your company will find its financial advantage, especially once you get rid of monthly payments, regular rent increases, or even the threat of breaking the lease. Symbolic, because the purchase of commercial premises corresponds to the moment when you can finally consider your workplace as acquired, as fully yours: it is a stage in the development of your entrepreneurial project.
What are the Various Ways to Finance your Commercial Premises?
That’s it, your decision is made: you want to buy your commercial premises. Congratulations on this decision and reaching this new milestone!
According to Tim Archibald, you must now determine the method of financing you wish to choose for this most important purchase. You can consider several methods, and the choice you make will depend mainly on the situation of your company and your potential plans for the future. There are 3 possible situations here:
1st situation: you prefer to opt for external financing, that is to say, seek financial assistance outside the company, for example from a banking establishment or external investors.
2nd situation: you have the possibility of choosing internal financing because your company has enough cash to provide the money necessary for the purchase of your premises itself – we then speak of equity financing.
3rd situation: you wish to opt for equity financing, but your company does not have the necessary cash at the moment: you must then carry out a capital increase – there are several methods for this.
Making a decision between these three solutions is not something to be taken lightly. For example, sufficient cash funds are not a sufficient argument to opt without thinking about the purchase in equity! The company must not be deprived of the funds it needs for its activity and its development as Tim advised.