Need to Lease Space for Your Business?

Here are some important facts before you do!

You’ve worked extremely hard to get your business off the ground from home and your efforts have finally paid off. You’re now ready to make the ultimate commitment: to establish your first real place of business.
For every small business owner, it’s both exciting and frightening at the same time.

Whether you supply a professional service, have a wholesale or retail goods operation, or you’re a food service company of sorts, finding and securing just the right location can be a wearying task.

Obviously, the logical first step is to Lease the space you need, rather than purchase it. This enables you to reserve your capital to fund your business growth and provides greater flexibility for expanding your operations as the need arises.

In today’s fast-paced, quick-thinking business world, a prudent entrepreneur very much understands that “growth” and “risks” are synonymous. And, beyond this, the road to success is paved with opportunities that can easily crumble if little attention is given to the risks and liabilities that get assumed along the way.

With this in mind, and prior to contending with the numerous land mines in any Business Tenant Lease Agreement (Lease), here are some important facts you need to keep in mind before venturing out to secure your new business location:

1. Typically, real estate agents are paid for their services directly from the Landlord, in the form of a commission fee (usually between 3% to 6% per cent) of the total Net Lease amount over the Lease Term. This definitely means that your agent must fully understand your facility needs and show you all available locations (and hopefully those coming available) which meet with or come very close to meeting with your needs. Before looking at anything that might work, it’s best to provide your agent with a list containing (in order of priority) the top seven (7) most critical features for best accommodating the operation of your business – for today and with looking ahead over the next few years (this list will then represent your search criteria);
   
   
2. Signers beware! There are several provinces, states and municipalities where a signed Offer to Lease constitutes a legally binding agreement between the respective parties. An Offer to Lease should never be signed without first having it reviewed by an independent and knowledgeable professional;
   
   
3. The formatted Lease you receive to sign will be the Landlord’s. You must keep in mind that it was skillfully prepared by very astute professionals working in the best interest of Landlords – not Tenants;
   
   
4. While the provisions within each Lease can vary from one Landlord to the next, all are complex contracts that contain serious risks and liabilities ready for the anxious business Tenant to assume. One of the biggest and most common mistakes a business owner can make is entering into a Lease without first having it properly assessed by a professional, and preferably the same person who provided impartial skilled help with the Offer to Lease;
   
   
5. As a young enterprise that’s never leased business space before, and whether you’re a sole proprietorship or an incorporated company, it’s not uncommon for any Landlord to request a personal guarantee from you regarding all responsibilities and obligations of the Tenant per the Lease. Even though this is certainly open to negotiation, very few business owners will pursue removal or even limitations to this dangerous provision, and usually for fear they won’t meet the Landlord’s requirements to secure the space. Remember, the golden rule; do everything you can to keep your business and personal obligations separate;
   
   
6. Unlike the residential sector, there is no governing body that actually regulates the rights and obligations of the commercial Landlord and the business Tenant. Therefore, what’s stated in the Lease is what determines how the relationship between the two parties will function;
   
   
7. According to statistical survey, a typical commercial or business lawyer spends a very small portion of their time actually structuring and negotiating Lease contracts. It’s been said that many lawyers prefer to apply their energies toward much more lucrative matters such as Landlord & Tenant disputes.

In conclusion, Lease Agreements have become very complex and hazardous contracts, especially for young businesses. To be sure you get what’s best for your business, it makes a lot of sense (and cents) to use the help of professionals dedicated to protecting the needs and rights of Business Tenants. These experts are thorough, responsive and very cost-effective, and they work entirely in your best interest. It’s their ultimate goal to ensure you get the best possible Lease and the peace of mind and freedom you need to focus on growing your business. After all, isn’t that what’s most important?

Article Provided by Lease Arrangers
LeaseArrangers.com

To Lease, or Not To Lease?

For most business owners and their financial officers, leasing versus buying the big ticket items required for day to day operations i.e. Equipment, Real Estate or Transportation related, has always been a topic of much debate.

Simply put, the common rule to follow should always be; when any item you need to generate revenue for your business has the ability to continuously appreciate in value (regardless of the economic conditions at the time), definitely purchase rather than lease.


And, by this common rule, many think that Real Estate is a sure buy.

However, if your business is just starting out or at a critical stage of its development, despite what your R/E agent may suggest, the ownership approach should be put on the back burner for a while. The strategy (rather mandate) should be to conserve cash and focus all efforts on creating strong, stable growth for achieving true business success.

Vital expansion needs and the ability to remain flexible for exiting at the same time is why early ownership of your business workspace doesn’t make sense. Although, it certainly would if there’s oodles of surplus cash to comfortably dole out a sizeable down payment (30 to 35%) and the business is consistently generating positive revenues to support paying the mortgage payments and all operating costs, including without limitation; property and income taxes, maintenance, insurance, utilities and a monthly budget of about 10% of the total monthly costs for applying to unforeseen issues. Not something most business owners can expect to accomplish during weak economic teams. Nor should they try!


Using your Equipment is what makes you money, not owning it!

Since your business equipment depreciates in value from the first moment you put it to work, there’s no justification whatsoever to own it. Essentially, wear and tear and technology obsolescence are the key reasons. From computers to cooking ranges, furniture to forklifts, vehicles to voice mail systems…you name it, 98% of the time, the value of your business equipment plunges by 25 to 30% within the first year to 18months. This is precisely why equipment and transportation leasing has become the most favored approach.

Almost 85% of all SME’s to "Fortune 100" companies lease some or all of their equipment. And why not; when monthly lease payments can be tuned with projected revenues, tightening budget constraints, and there’s no up front tax to pay. No need to increase bank borrowing capacity either. And, many equipment and vehicle leases can be structured with no money down, even with declining monthly payments as the goods devalue. And, the ability to qualify for funding relative to getting a loan is a very quick and painless process. As well, it’s much easier to get out of an equipment or transportation lease by transferring it to someone looking for the same items under a shortened term which saves them serious money.

In summary; To Lease or not to Lease is not the question....it should be, What’s your best Lease rate and terms?



Article Provided by Lease Arrangers
LeaseArrangers.com