Getting a new lease typically involves upfront cash in the form of a security deposit and advance rent, which translate to heavier financing requirements to start your business. On the contrary, to make their offer more attractive to tenants, businesses looking to get out of their lease can be lenient and may allow you to move in without as much cash. If you are borrowing to finance your business, less cash upfront can result in savings on interest expense. Instead of handing a large deposit to your lessor, available funds can also be used as additional operating capital.
Many retail and office buildings start out with spaces consisting of little more than a few walls and doors. In such cases, constructing the building interior to meet the needs of your business will require more financing and more interest expense payments over a long period of time. One major advantage of assuming a lease is the savings you can get from getting a space that is already finished and does not require many alterations. Chancing upon a lease from a space with a business similar to the one you intend to operate can be a steal.
Save On Rent
Some business owners who are losing money sometimes find it better to assign their lease rather than face the stiff penalties for breaking their lease contract. In such situations, you can save money on rent, because owners are sometimes willing to settle for a lower rent. For example, if a business owner who is paying $2,000 monthly is forced to close shop but decides to rent his space to another business for a slightly lower rate of $1,600 dollars, he may actually lose less than what it would cost to break the lease early.
The location of your business is a major factor that can spell the difference between success and failure. In cases where you have to choose between a location wherein you have to sign a new lease versus a location wherein you have to assume the lease, the location that will bring in more revenue should always be the basis for your decision. A good location can have the ability to bring in sales that will more than cover the rent of a new lease or make the savings that you’ll generate from assuming a lease become immaterial.