Even though you can cover the loan payments on an annualized basis, you may have a problem in February and March, for example. You have to build up cash reserves for those slow months. If the income produced by the growth is not enough to repay the debt in the near future, the new business may not be profitable enough. The cost of space is a major budget item for retailers. According to King, the tax implications of buying and renting are similar.
Every dollar spent on retail space is eventually deductible.
On the other hand, for an established business, the potential for long-term capital appreciation on the building is attractive. Retailers also often want to expand and move to new locations. Leasing also gives you the flexibility of relocating if the market changes. The downside is that any substantial investment in the store's structure will be left behind if you relocate. We found we could get triple our current space for double our current rent by buying.