Every entrepreneur faces make-it-or-break decisions—but few are as crucial as where to set up shop. Should you buy or lease your commercial space? From upfront costs and financing options to growth potential and flexibility, here’s how to make the right move for your business.

Evaluate the pros and cons of leasing versus purchasing.

The decision to own or rent a commercial space comes down to what works best for your business. “A lot of business owners look at it like, ‘I need to pay rent somewhere, so I might as well pay it to myself.’ That can make a lot of sense in some cases, but you should think of the building as separate from your business—you’re making a real estate investment,” says Tony Ferraro, managing director of commercial banking for Bridgewater Bank. “If you’re pulling the money out of your company for the down payment, is the purchase setting you up for growth—or is it creating a strain?”

Leasing typically means fewer upfront costs, less responsibility for property upkeep, and the flexibility to move when your lease ends to accommodate the growth or downsizing of your business. On the downside, you’re at the mercy of rent hikes, unpredictable lease renewals, and the inability to build equity.

By purchasing a commercial space, you have more control over the property. You don’t have to worry about a landlord increasing your rent or terminating your lease, and if your business is doing well, you’re creating a source of wealth. Of course, “you also take the risk of owning a piece of real estate. It’s added debt,” says Ferraro. “If your business doesn’t work well, you may have to fill the space with somebody else, or you could take a loss when you sell it.”

Consider your financing options.

Two common loan options can help finance a commercial purchase. The first is a Small Business Administration 504 loan, which provides long-term, fixed-rate financing up to $5.5M for major fixed assets that promote business growth and job creation.

“Most business owners are pulling the money [for real estate] out of their business, which can impact their working capital, so many of them want to put the minimum amount in. The SBA 504 product makes a lot of sense for them,” says Ferraro, noting that SBA 504 loans typically follow a 50/40/10 structure, where the borrower provides a 10 percent down payment, the lender provides 50 percent of the loan and the remaining 40 percent is backed by Certified Development Companies, the SBA’s community-based nonprofit partners.

Another option is a commercial mortgage, which requires around 25 percent down but offers more flexibility in structure, repayment, and rates.

Work with a trusted local banker.

As you begin looking for a commercial space to own or lease, a trusted local banker can walk you through the process to make sure you’re making the best, future-focused decision for your business. The right banking partner will connect you with brokers and ask key questions, such as, how important is it that you own a building, and how will a down payment impact your business?

“At Bridgewater Bank, our goal is not to talk you into or out of anything. It’s to be a strategic partner in this decision and throughout your entrepreneurial journey, providing valuable insights that help you move forward with confidence,” says Ferraro. “At the end of the day, you decide what is right for your business, knowing we’re here to equip you with the tools and support you need to succeed.”