Solution Mortgages News

Solution Mortgages news on bad credit remortgages, poor credit remortgages and for people with arrears & ccj’s. Remortgage news with regards to the adverse credit market and people with sub prime credit.

Friday, January 25, 2008

Advantages of buying a commercial property

There are many advantages to buying a commercial property for your business. We have listed some of the main one's below:-

Retention of ownership - the business is able to raise funds without resorting to selling a share in the company, either to an interested investor or by issuing shares. This allows the original owners to retain ownership and control. The lender has a right to interest on the loan, but not to a share in the business or the profits. The lender can only call in the loan in the event of default, and even then only has a charge on the property, not the rest of the business.

Taxation - mortgage interest payments are made with pre-tax money and are deductible for tax purposes as expenses. In contrast, purchases made from profits are taken from taxed income.

Financial leverage - using a mortgage to buy the property is likely to free up capital held in the business and cash flow for other uses. Borrowing outside a mortgage is likely to be more expensive. In addition, an increase in the value of the property will allow the business to borrow against it, if necessary.

Cost and cash flow management - mortgages allow access to capital that would not normally be available. They require limited initial payments and offer a degree of flexibility in designing a repayment schedule to suit the needs of the business, which could include fixing or capping payments for a number of years. Mortgage payments are often lower than rent, and the borrower will know what the payments will be in advance. This fixed overhead helps with cash flow and managing costs. Rental tenants are exposed to market conditions, which means that rents could rise at a review.

Security of tenure - those businesses that rent have few guarantees beyond the end of the current agreement.

Potential asset appreciation - property has long been seen as a sound investment. The business will have an asset that has the potential to grow in value which, in turn, will increase the value of the business.

Potential to sublet - the business might not need all the space the property offers. In this case, running costs could be offset by sub-letting the excess space to another business. The owner business would need to ensure an appropriate rental agreement is used, in order to retain control of the space and ensure it can be reclaimed with minimal effort if expansion is planned.

If you are considering buying a commercial property for your business, please feel free to call Drew Mitchell at Solution Mortgages on 0845 123 1260.