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Down to Business
Monday, November 16, 2009 | No comments posted.
Arlene M. Soto
Question: Is it better to buy a building or lease a space for my business?
Answer: It depends how successful your business is, your tax situation, your access to credit, the growth potential in your business, your customer’s needs and the availability of suitable business space for lease.
It is often difficult for a startup to justify the cost of buying without a thoroughly researched business plan. Until you have operated your business for some time, you will not know how successful it can be, how much space it will require short and long term and whether customers will be comfortable with the location.
n If you are in the early stages of a manufacturing venture, you might be eligible to rent space in the Oregon International Port of Coos Bay business incubator, a facility designed to assist small ventures before they make the decision to buy or build a facility.
n Startup ventures are risky and banks are often not comfortable making loans to them. If the business should fail, can the building be rented or sold? In areas with excess capacity, bankers will be concerned about the risk of loaning against property that’s difficult to resell or if you cannot show an ability to repay the loan out of other income sources. Many lenders will ask what alternative uses the building will have if your business no longer needs it.
n Consider zoning laws and the availability of commercial space. Zoning can have an impact on the type of buildings allowed and how those buildings are used — important considerations if your business should change over time.
n Finally, consider the financial consequences of both buying and leasing. Your accountant or business advisor can help you analyze cash flow, taxes, maintenance and repair costs, insurance, lease agreements and growth strategies.
A commercial realtor, the local economic development department or an accountant can be very helpful in making the decision between leasing and owning commercial real estate. A good business plan is helpful in knowing what the long term goals are for the business and to analyze the cash flow potential. Talk to an adviser at Southwestern Oregon Community College Business Development Center to get help on writing a business plan. Find out what the growth trends are. Research, planning and finding professional help can save money and time.
(Arlene M. Soto is the Director of the Southwestern Business Development Center. She can be contacted by calling 756-6445, e-mail asoto@socc.edu, or write 2455 Maple Leaf, North Bend, OR 97459.)
Question: Is it better to buy a building or lease a space for my business?
Answer: It depends how successful your business is, your tax situation, your access to credit, the growth potential in your business, your customer’s needs and the availability of suitable business space for lease.
It is often difficult for a startup to justify the cost of buying without a thoroughly researched business plan. Until you have operated your business for some time, you will not know how successful it can be, how much space it will require short and long term and whether customers will be comfortable with the location.
n If you are in the early stages of a manufacturing venture, you might be eligible to rent space in the Oregon International Port of Coos Bay business incubator, a facility designed to assist small ventures before they make the decision to buy or build a facility.
n Startup ventures are risky and banks are often not comfortable making loans to them. If the business should fail, can the building be rented or sold? In areas with excess capacity, bankers will be concerned about the risk of loaning against property that’s difficult to resell or if you cannot show an ability to repay the loan out of other income sources. Many lenders will ask what alternative uses the building will have if your business no longer needs it.
n Consider zoning laws and the availability of commercial space. Zoning can have an impact on the type of buildings allowed and how those buildings are used — important considerations if your business should change over time.
n Finally, consider the financial consequences of both buying and leasing. Your accountant or business advisor can help you analyze cash flow, taxes, maintenance and repair costs, insurance, lease agreements and growth strategies.
A commercial realtor, the local economic development department or an accountant can be very helpful in making the decision between leasing and owning commercial real estate. A good business plan is helpful in knowing what the long term goals are for the business and to analyze the cash flow potential. Talk to an adviser at Southwestern Oregon Community College Business Development Center to get help on writing a business plan. Find out what the growth trends are. Research, planning and finding professional help can save money and time.
(Arlene M. Soto is the Director of the Southwestern Business Development Center. She can be contacted by calling 756-6445, e-mail asoto@socc.edu, or write 2455 Maple Leaf, North Bend, OR 97459.)
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