Side-by-Side Comparison

Buy vs. Lease Commercial Space: The 10-Year Math

Buying your commercial space eliminates lease exposure permanently. Leasing costs $600,000+ over 10 years with nothing to show for it.

10-Year Commercial Lease

$5,000/month base rent, 10-year term

  • ✓ Lower upfront cash requirement — no down payment
  • ✓ Geographic flexibility to move if business needs change
  • ✓ Landlord responsible for structural maintenance
  • ✗ $720,000 over 10 years with zero equity
  • ✗ Personal guaranty exposure throughout the term
  • ✗ Rent increases every year with no ownership benefit
  • ✗ Restoration liability at move-out

Purchase Commercial Space

Buy equivalent space for $600,000 with SBA 504 loan (10% down = $60,000)

  • ✓ $60,000 down payment vs. $600,000+ in lease payments over 10 years
  • ✓ Building equity — property value appreciation
  • ✓ No restoration liability, no personal guaranty on lease
  • ✓ Mortgage interest and depreciation tax deductions
  • ✗ Requires $60,000+ down payment (10% SBA 504)
  • ✗ Geographic inflexibility — harder to move
  • ✗ Responsible for all maintenance and capital improvements
  • ✗ Real estate market risk
★ Recommended

The Verdict: Purchase Commercial Space

For businesses with 3+ years of profitable operations and qualifying financials, buying is almost always the superior long-term financial decision. SBA 504 loans at favorable rates make acquisition accessible. The combination of equity building, tax advantages, and elimination of lease exposure creates a compelling financial case for ownership.

Key Factors in This Decision

  • Business track record (3+ years profitable)
  • Down payment availability ($60,000-$150,000 for SBA 504)
  • Business location permanence (5+ year planning horizon)

Frequently Asked Questions

What is an SBA 504 loan?
A Small Business Administration 504 loan finances owner-occupied commercial real estate at favorable terms — typically 10% down, 25-year amortization, fixed rate for 10-20 years. Available for businesses occupying at least 51% of the space.
What businesses qualify for SBA 504?
For-profit businesses with tangible net worth under $15 million and average net income under $5 million after taxes. Medical, dental, veterinary, and many other professional service businesses commonly use SBA 504 for real estate purchase.

Know Which Option Is in Your Lease.

LiabilityScore™ reads your actual lease and tells you exactly what provisions you've signed — with specific dollar amounts and negotiation recommendations.

Score My Lease Free