However, former BVB midfielder Freund cited the example of Real Madrid flop Jovic as to how a big-money move to a new club at such a young age can hamper a player's development.
Jovic starred in the German top flight with Eintracht Frankfurt last season with 17 goals, but the 22-year-old has scored only twice in an underwhelming debut campaign in Madrid and has been linked with a move away.
Freund, who spent five years with Dortmund from 1993, is worried Sancho's career could go the same way if he makes the wrong choice when the transfer window opens for business.
"Jadon is ready to play for Liverpool or Man United, no question, because his stats are unbelievable. That shows that he can take the next step," he told talkSPORT.
"In the Borussia Dortmund side with [Erling] Haaland, [Julian] Brandt improving, with Emre Can signing, with changing to a back three – that suits Sancho.
"It would be good for him to play for Borussia Dortmund now and next year so that he will have more match time.
"He's only 20, so why not play for Borussia Dortmund? We're not talking about Freiburg or Paderborn; we're talking about Borussia Dortmund, one of the top 20 clubs in Europe.
"Remember Jovic, who moved to Real Madrid from Eintracht Frankfurt – he's not playing. If you have an offer from Real Madrid you think, 'I have to go'.
"No, you don't have to go because the salaries in the Bundesliga are on a good level, too – not as much as Real Madrid or the Premier League, though.
"But you can earn good money and improve and not make too much of a big step at once.
"So, for Jadon to move to Man United with that pressure, they are struggling to qualify for the Champions League, so maybe it's better to stay another year in Dortmund."
Dortmund sporting director Michael Zorc revealed last month he does not believe any teams will risk spending big for Sancho amid the coronavirus pandemic, which has led to clubs across the world facing a significant loss of earnings.
Freund has suggested it may be best for any interested parties to hold off from tabling an offer for the English youngster, who is reportedly valued well in excess of €100million, until BVB feel forced to cash in.
"If the offer comes in and the people from Borussia Dortmund think it's right then they will sell him," he said.
"With the coronavirus, if something goes wrong in the Bundesliga and we can't see football until the end of the year, then it's not the right moment to talk about players, they cost so much money.
"I think the price will drop anyway. All the clubs in Germany are losing a lot of money.
"It's not the same without money from tickets and sponsors and so it'll be difficult to keep your best players."