U.S. small businesses' rent delinquencies jumped in October as persistent inflation pressures ate away at their earnings. Specifically, 37% of SMBs couldn't pay their full rent last month, up from 30% in September, according to a recent survey from Alignable, an online referral network of seven million small business members. If you’re a small business struggling to make rent payments, what can you do?
Check Your Lease
Look through your lease and see if there’s anything in there allowing you to suspend rent obligations. Perhaps you can terminate your lease early – which may be something to consider if you see the end of your business coming soon. Consider exercising an option for early termination of the lease if it’s available.
Call Your Landlord
It may seem counter-intuitive but don’t wait to call your landlord. Let them know you’ve hit some difficulties. Your landlord does not want you to default on the lease. They have everything to lose and nothing to gain when you leave. They may be willing to allow you to suspend or reduce your rent payments for a period of time. If you work something out, make sure you get it in writing and both you and your landlord should sign it. It’s also worth calling your lawyer for help deciphering your lease, strategizing about how to negotiate with your landlord.
If your landlord contacts you about short or missing payments, do not ignore their calls. We’ve represented lots of landlords and they all complain when tenants do not communicate with them. They are often willing to help struggling tenants for a while – provided there’s frequent and open communication.
Protect Your Personal Assets
If it looks like a default might be unavoidable, you should read the lease to determine whether you have any personal liability for the lease obligations. Did you sign a personal guaranty? If you are married did your spouse sign a guarantee as well? You may have the ability to retitle or move our personal assets around to protect them in the event your landlord sues you for unpaid rent. Your attorney can help you understand if this is a viable option for you and help you execute a game plan.
Look for Funding Sources
Consider a business loan to get you through your revenue struggles until the economy recovers. Perhaps there are small business grants or low-interest loans available. Check with your state department of economic development as well as small business offices in your county or city to see what advice or links they can offer. If you’re negotiating with your landlord, it will only improve your chances of success if you can tell your landlord that you’re pursuing additional funding.
Call The Business Team at Fiffik Law Group
It’s never too soon to call our small business attorneys. You’ll have more and better options if you work with them early rather than after you receive a default notice, or worse – a lawsuit, from your landlord.