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How To Open A New Premises

The premises from where you operate your business can have a significant impact on its performance. There are several important aspects related to your business premises that individually and accumulatively determine the success of your business.  

Ownership of Premises 

The afore-mentioned aspects are quite dependent on each other and this further increases the complexity of making a decision. For example, a parameter as important as the nature of ownership is quite dependent on the location of the premises.  

Office spaces located in prime market areas are often out of small businesses’ reach. To run a business from such a prime location, businesses have to either add rent as another recurring expense to their list of outgoings, or arrange for the required finance to buy the space.  

If as a business owner you find yourself compromising on either the location or ownership of the premises, we at Nucleus Commercial Finance can provide you with the necessary asset finance. Depending on your requirements, you can use the finance to either pay for the lease or buy the space entirely.  

 Following are the three most popular ways in which you can set up new premises for your business: 

License 

  • Acquiring a property on license offers business owners maximum flexibility.  
  • They are only required to pay a small deposit and minimum legal fees, thus making it the cheapest option when it comes to setting up a new premises.  
  • The flexibility in terms of altering the premises according to requirements is quite limited, but the responsibility of maintaining and repairing the premises rests solely on the landlord. 
  • It doesn’t offer much security to the business as the landlord only needs to give a short notice period for terminating the agreement. 

Lease 

  • Leasing offers greater security but less flexibility. Compared to a licensed property, the tenure of a lease is more secure which is generally between three and 25 years.  
  • The increment of rent is pre-determined and is reviewed at fixed periods, which has its own advantages and disadvantages. For example, if the real estate market performs well, fixed rent increments offer a lot of scope for savings. On the other hand, if the market falters, the rent would be higher than that prevalent in the market.  
  • A property that you have bought on lease can be altered, but only with the due permission of the landlord. 

Buying A Premises 

  • Usually businesses buy premises when they are looking to make a long-term investment or have a large cash reserve.  
  • The benefits of owning an office space are quite similar to that of owning a house. It places no restriction whatsoever on the duration for which you wish to occupy the premises. Also, you do not need anybody’s consent to alter the premises.  
  • Even if you no longer operate your business from the office space you have purchased, you can earn money by renting it out to other businesses. For the times when your business faces cash flow troubles. you can always sell the premises or use it as collateral to generate positive cash flow.  

 

Location 

Most of the advice that is dispensed to start-ups stresses the importance of setting up a business in close proximity to its target audience. It is not without reason that business owners find themselves perplexed when confronted with the question of where to set up their business.  

The location of your business depends on many factors other than finance, such as the nature of your business. A restaurant needs to be located in a prime commercial or residential area or any such area that witnesses a high amount of footfall.  

A manufacturing business which depends on its suppliers for raw materials needs to be located in close proximity to its suppliers, so as to minimise the expenses on logistics.    

As an employer, you should also take into consideration the amount of time that your employees would take to commute to the office. This can be minimised by setting up the office in a location which is easily accessible to everyone.  

 

Requirements 

Besides finance and location, there are various other aspects that need to be considered such as your basic business requirements. 

When looking for an office space, it is important to have clarity regarding the amount of space that is actually required. The area or size of an office has a direct relation with the cost or rent value of it. It is quite likely that your finances will be strained when moving into a new office. In such times, paying for an unnecessarily big office space can increase the financial burden on your business, which may end up catapulting your business into a huge cashflow crisis.  

 

 

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