Business Tips

Benefits & Drawbacks of Owning Your Own Commercial Property

Benjamin Lam
April 18, 2023

Benefits & Drawbacks of Owning Your Own Commercial Property

Having an operating address is essential for many companies in Singapore especially after we move out of a work-from-home era. A commercial space or office can allow for greater collaboration and efficiency for employees therefore, this article will explore the various benefits and drawbacks of owning your own commercial property as compared to renting. We will also explore options of business financing for your enterprise.


Predictable Monthly Expenses and Increased Control

As compared to a rental which is subject to changes upon each renewal from your landlord, owning your own commercial property means that the only thing that you are subject to is your repayment of your Business Property Loan. This can help provide companies with a predictable monthly expense, allowing for more straightforward budgeting and financial planning. This predictability can help businesses stabilise their cash flow and reduce financial stress, especially during challenging economic times.

Additionally, owning a commercial property gives businesses greater control over their space, enabling them to modify it to suit their specific needs and preferences without relying on landlords' approval.

Long-term Financial Benefits

Owning a commercial property can also offer long-term financial benefits. As the property's value appreciates over time, businesses can potentially build equity, which can be a valuable asset for future expansion or diversification plans.

Moreover, if the company decides to sell the property, it may benefit from capital gains, which can further contribute to its financial growth.

Flexible Loan Tenures

For commercial property purchase, these loans often come with generous loan tenures (up to 30 years depending on applicant’s entry age) providing adaptability to cater other financial requirements. With this extended repayment period, businesses gain the financial breathing room to grow and thrive: this means more resources allocated towards other aspects of their operations, such as marketing, product development or employee training.


Interest Rates could get costly

Not only are interest rates on business property loans higher than those on residential property loans, they are also subject to fluctuations depending on market conditions. If interest rates go up, this can result in higher overall borrowing cost. This increased expense may affect your company's profitability and cash flow, making it crucial to carefully assess whether the potential benefits of owning a commercial property outweigh the additional costs. Measuring the interest expense against rental expense is a good way to measure which is a more affordable option.

Commercial Property Tax

In Singapore, commercial and industrial properties meant for non-residential use are taxed at a flat rate of 10%, which can add to the ongoing expenses of owning and maintaining the property. It's essential to factor in these taxes when calculating the total cost of ownership and determining whether a business property loan is the right financial decision for your company.

Maintenance and Management Responsibilities

Owning a commercial property also comes with maintenance and management responsibilities that can be both time-consuming and costly. As a property owner, you will need to address issues such as repairs, renovations, and property management, which can divert resources and attention from your core business operations.

It's essential to consider whether your business has the capacity to handle these responsibilities before committing to a business property loan and a commercial property.

Final Thoughts

Taking a business property loan to own a commercial property can offer numerous benefits, including predictable monthly expenses, increased control over commercial space, and long-term financial advantages. However, they also come with potential drawbacks, such as higher interest rates, additional taxes, and increased maintenance responsibilities.

When considering a business property loan, it's crucial to weigh these factors against your company's needs and financial situation. Lendingpot can help you connect with multiple lenders, enabling you to find the most suitable loan for your business needs. Explore your options with Lendingpot today and secure the ideal property for your growing enterprise.

Leading digital loan marketplace Lendingpot connects SMEs to its network of 45 lenders comprising relationship managers from banks, financial institutions, and private and peer-to-peer lenders in Singapore. It aims to help SMEs overcome the information asymmetry problem and lack of transparency prevalent in the SME financing sector by offering SMEs financing options such as business term loans, property loans, revenue-based financing, credit lines, working capital loans, bridging loans, invoice financing, and more.

About the author

Benjamin heads up Lendingpot with a background in all things SME. He was previously a commercial banker at Citi with experience in Relationship management, Credit Risk, Trade Operations and Corporate FX sales; and understands the difficulties SMEs face in this opaque world of SME financing.

Commercial Property
Property Loans
business loan
SME Loan
SME owners

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