Lease vs. Own: Deciding Which is Right for Your Business – Real Estate Matters
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Lease vs. Own: Deciding Which is Right for Your Business

From:  Finance & Commerce

By Matt Boehlke, CCIM

Businesses are constantly faced with tough decisions, but few decisions carry the financial weight and Matt Boehlkelong-term implications that are involved in a company’s real estate.  Should we lease or purchase a property? Both options have several advantages and disadvantages.

Availability of capital can be a huge factor when determining whether to lease or purchase. If a company is flush with cash and has no major purchases or needs in its future, it may make sense to invest that money in a new facility or building.

On the other hand, if a company has a need for the cash on hand or doesn’t have a lot of cash, leasing may be preferable because the initial investment is lower and leasing provides a simple form of financing in itself. Altogether, this could be considered a company’s opportunity cost. Are there better options available to spend capital on, other than real estate?

Available financing factors into the decision as well. Many businesses are able to take advantage of financing from the U.S. Small Business Administration. This allows most to purchase a property with as little as 10 percent down at fairly low interest rates. Many times, other necessary equipment and improvements can be wrapped up in the SBA loan, making the decision to own very attractive. But just because financing is available, does it make sense for your business to capitalize on it?

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