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Buying a Business – Leasehold vs Freehold

You’ve got two options when it comes to buying a business.

You can buy the leasehold, where you’re purchasing the right to use the land for a set period of time, but don’t have the same property ownership rights. On the other hand, you can buy the freehold, where you’re outright purchasing the property itself, with all the rights that come with it.

What is the difference between the two options?

Many businesses, especially younger ones without significant resources, like to look at leasehold purchases. Leaseholds are, after all, significantly cheaper. However, there’s an important caveat that every business should be aware of if they’re going to need finance to purchase – security.

You can get finance for a leasehold purchase. However, this might have to be an unsecured loan, through a particular scheme, or using additional security. This could make obtaining finance more challenging.

A freehold purchase might be more expensive on paper, but it comes with a much greater array of options available, with the added security being attractive to potential lenders. You also don’t run into issues with what you can do with the property when you own the freehold. Whilst business leases can be somewhat less strict than a residential tenancy, you’re still beholden to the desires of the actual freehold owner, and don’t necessarily have control over your ability to stay in the property. With a freehold, you’re the owner of your property, and you’re not beholden to anyone.

Should i buy a freehold or a leasehold business?

We’re not here to tell you which option to choose when you’re looking at a business purchase. But you should always be keeping in mind how what you choose affects your financial process.

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