The small business owner’s guide to Companies House

Scaling your business may result in a need to move or change your business premises.

Whether you’re bursting at the seams in your current location or looking to expand your operations, finding suitable premises could be a springboard for growth.

However, securing finance for this crucial step remains a challenge for many small to medium UK businesses.

A recent survey indicated that over 50% of SMEs plan to invest in property, yet one-fifth find it challenging to secure funding, potentially preventing their business from scaling quickly.

By defining your needs, thinking ahead, and utilising the right financial strategies, you could accelerate the growth of your business footprint.

Choosing premises for growth

Choosing suitable premises for your business may help encourage swift expansion.

Assess your current premises

Start by performing an audit of your current workspace.

Is your workspace crowded, is storage an issue, and are you struggling to fit in future employees?

A step in making a property decision should be a straightforward assessment of your current situation, including its advantages and disadvantages.

The government provides advice on evaluating your property needs.

This could help determine if you need to move and options such as reorganising your existing workspace.

Consider your short-term and long-term needs

Given the dynamic nature of the business environment, your needs may evolve.

It may be a good idea to ensure that new premises offer flexibility to accommodate shifting needs rather than locking your business into a rigid solution.

Crafting a detailed corporate growth strategy could help you accurately predict these needs.

It may be beneficial to seek professional advice from institutes such as the Royal Institution of Chartered Surveyors (RICS) for business premises advice.

Properties that allow for modifications or expansions can be a good idea.

Flexibility should also extend to the lease terms.

The government’s commercial property lease guide may be a helpful starting point.

To buy or to lease?

Buying property offers asset appreciation, control, and predictable mortgage repayments when on a fixed term but may require a significant initial investment, and there is a risk that the property’s value may fall.

Leasing usually requires less upfront capital and may cover maintenance costs, yet it may expose your business to rent increases and renewal uncertainty.

Property types such as co-working spaces or shared industrial units may be worth considering, which are ready-to-use, cost-effective, and flexible but might offer less privacy and limit longer-term growth.

Location, location, location

The success and expansion of your business may be heavily influenced by location.

Accessibility, closeness to suppliers, local amenities, infrastructure, and market dynamics can be important factors.

Local authority grants or location-specific incentives like Enterprise Zones with tax breaks and more straightforward planning may help reduce operating expenses.

Contacting your Local Enterprise Partnership, Enterprise Agency, Chamber of Commerce or Trade Association could help you select a business-friendly location.

Property space

Selecting a property with the right space can be a balancing act.

A location too small may restrict your operations, while an overly large space may lead to unnecessary costs, such as higher business rates or energy costs.

Calculate the square footage you need for current operations and the likely space you’ll need for future growth to get an idea of the type of size you need.

Business rates

Considering all costs related to business premises is crucial.

Apart from rent or mortgage, this may include business rates, insurance, utilities, fit-out and moving costs, service charges, maintenance fees, professional fees, and taxes like Stamp Duty Land Tax.

Business rates are calculated by your local council on the property’s rateable value and are generally linked to the size of the premises.

Find out more about business rates and how they are calculated.

Facilities and utilities

Property selection hinges on understanding your facility and utility needs.

Consider IT, logistics requirements, parking availability, the building’s condition, and security measures.

Adequate parking may enhance employee experience, and a well-kept property may indicate a responsible landlord, minimising future maintenance costs.

A secure site may help protect your assets and staff and may result in lower insurance premiums.

All these aspects ensure a comprehensive, informed property choice, and can help prevent unexpected issues later.

Cost of occupation

The financial implications of choosing new premises extend beyond the purchase or lease cost.

As you consider a move, remember to calculate and factor in expenses associated with the new premises, such as service charges, business rates, and potential increases in overheads like energy usage and security measures.

Adequate financial planning ensures you stay within budget while investing in growth.

Understanding all the costs associated with your new property is essential to this.

Prudent financial planning allows you to make an informed, strategic decision that aligns with your financial health and bolsters your growth trajectory.

Funding premises

Securing the right financial backing is crucial when planning for property investment.

There are different ways to pay for new premises – from taking out a commercial mortgage to raising finance to pay for a lease.

Examples of funding your company might be able to access to support leasing or buying commercial property includes:

Commercial mortgages

This is a loan secured against commercial property, rather than residential property.

Unlike residential mortgages, the terms and conditions of commercial mortgages may be dependent on the business’s financial health and the property’s potential profitability.

It’s worth noting that commercial mortgages may involve more scrutiny of the borrower’s financial position, and the repayment terms may be stricter, with larger deposit requirements and shorter repayment periods.

Read our guide on how to finance a commercial property purchase.

Angel investments

Angel investors typically offer capital in exchange for equity in a company.

An angel investor may contribute funds to help a business purchase commercial property.

While not a traditional approach to obtaining property, this could be a viable option for businesses with a strong growth potential that could yield a return on the angel investor’s initial investment.

Learn more about angel investors.

Bridging loans

A bridging loan is a short-term financial product typically utilised in property purchases to bridge a gap in financing until long-term funds can be arranged.

Bridging loans may come with higher interest rates than longer-term financing options, and they may be useful in scenarios involving property development, auctions, or when a quick purchase is required.

Find out how bridging loans work.

Business loans

A business loan could be used to finance the purchase or development of the premises, and there are lots of funding providers that offer business loans.

These loans are generally secured, meaning the commercial property itself could serve as collateral for the loan.

Learn more about business loans.

Business grants

Business grants could potentially be utilised to finance the purchase, renovation, or expansion of premises.

This could include initiatives aimed at revitalising local communities such as high streets, promoting sustainability in construction, or supporting businesses in sectors that are a key focus for economic development, such as environmentally focused enterprises.

Find out more about business grants.

Mezzanine finance

This is a type of hybrid financing that combines debt financing and equity financing and can supplement a primary commercial mortgage to cover a funding gap, thereby reducing the amount of equity you may need to contribute.

This form of financing is typically secured by a borrower’s equity interest in the property rather than the property itself.

Read our guide to mezzanine finance.

Venture capital

While not a typical route to secure funding for commercial property, a venture-capital-backed company might use some of its funding to acquire commercial property as part of an expansion strategy, such as if the business is heavily tied to physical locations, such as physical retail stores.

Learn more about venture capital.