If your business can no longer pay rent, here are five options available as a lifeline.
With every day that passes, financial strain increases. COVID-19 is ruling over how businesses run these days. The new business normal is laying off employees, halting production and serving fewer customers.
Companies of varying sizes are unsure of how to find the funds to pay their rent. No owner feels secure in what the future holds for their company. Many have had to close their doors. Ideally, businesses want a straightforward answer and reassurance. They want to know exactly how to pay rent during the coronavirus. But nothing is that crystal clear during a pandemic; it is chaotic, and there are no guarantees.
There are five options available to business owners that can help you buy some time to make your rent payments and to, possibly, receive some federal or local aid.
Check the terms of your lease.
Check your commercial lease for a clause about suspending rent in an emergency.
Your rent payment options will depend on what your lease agreement holds. There is no guarantee that your lease will contain information to use in your favor, but it does not hurt to look. If you do not find an emergency rent suspension clause, you might uncover other vital information you can use to your advantage. In fact, review all relevant company documents to see if you can find any clause or source of potential financial relief.
Business leases often have insurance that covers "business interruptions." However, usually, these policies apply to businesses that have suffered some form of physical damage. Paying rent without customers during the coronavirus pandemic will not be easy. You need to find financial aid for rent or grants that will cover other items. Then you can use that money for rent.
Speak with a lawyer about tenants' rights.
Before contacting your property manager, call an attorney first. Your lawyer can give you a better understanding of the lease and your rights as a tenant. Strategize with your lawyer about how to negotiate with your landlord. Ask whether there are any programs your attorney is aware of that your business can apply for.
If you currently do not have a lawyer, contact a local tenant rights organization. Find out if they can provide free legal advice about what to do if you cannot make rent payments during a crisis. There are also legal services that can provide free consultations with business owners in your area. Some other resources to check are nonprofit organizations and law firms that carry out pro bono cases.
Once you find and meet with a lawyer, reach out to your company's landlord.
Speak with your landlord.
If emergency coverage does not exist in your lease, use the negotiating plan made by you and your lawyer. Speak to your landlord about your company's financial difficulties during COVID-19. Communicate your long-term intention of wanting to lease the space. Try to work out a temporary rent payment plan so you can get through this crisis.
Informing your landlord of your current situation is best. Do not let them find out that your business cannot pay rent via bounced checks or missed payments. You need their trust to start a dialogue about future rent payment options.
If you clue your landlord in on what is going on, he or she may be more open to payment or repayment discussions. Come up with a rent payment plan that can cover your business until social distancing ends. Remind your landlord that this agreement can be beneficial to you both. Your business can rely on your landlord for help with rent in these troubled times. In return, they can count on you for rent payments in the future when better times come back around.
If you both agree to a plan that allows your business to suspend, reduce or defer rent payments, get it in writing. Make sure you consult your lawyer about the contract and then have both parties sign it.
Check for COVID-19 government aid.
Companies can apply for federal and local financial aid to get through COVID-19. The U.S. Small Business Administration (SBA) and the Treasury Department run the Coronavirus Aid, Relief, and Economic Security (CARES) Act. CARES is a financial program where companies can apply for full or partial loans. These loans are ones that you either do not have to pay back or only repay a portion of.
Look into what vital economic support your small business may qualify for to help with the temporary loss of revenue from the COVID-19 pandemic. One such government support method is the Paycheck Protection Program (PPP). It is a loan that the SBA will forgive if all employees remain on your payroll for eight weeks. PPP money must go toward utilities, mortgage interest payments and rent.
Another resource businesses can use is the low-interest Economic Injury Disaster Loan. Those that qualify can receive up to $10,000 of economic relief for COVID-19. Only small businesses with fewer than 500 employees can apply. The funds must go toward paying utilities, payroll and rent for the first eight weeks. It is a forgivable loan if at least 75% of the money received goes toward payroll.
Additional federal assistance exists for companies with financial troubles due to coronavirus. To see if your business qualifies or to apply for any of the loans, visit sba.gov.
Search for local funding and other financial resources.
The Small Business Administration has several local partners. They can provide support, counseling, mentoring and training for small businesses. The staff there can provide information about local funding to assist with rent. The SBA also has other resources available for local aid. The more you research, the more options you can find available to you.
Companies experiencing financial stress are quickly running out of money. If your business can no longer pay rent, look into what assistance is available to you. Check for both federal and local aid to give your business a fighting chance.
You can beat the hard-hitting financial impact of the coronavirus. Know your options to hold on to your business, and be ready for when the world can regain some normalcy.