For many businesses, May 1 brings a new round of anxiety around paying rent. While some were able to use savings or secure relief funding, others weren’t. With the majority of comics businesses being impacted, the lack of income makes the problem even more acute. Let’s take a look at some strategies you can use to help manage this painful situation.
1. Talk to your landlord like a partner.
The Coronavirus crisis affects landlords and tenants alike. Set a positive tone for your negotiation by being proactive, transparent, and forward looking. In the current climate, most landlords would prefer to work out an arrangement with a struggling tenant than have an empty storefront. Be the first to reach out, and ask to work together as partners.
2. Explain your plan with specifics.
Concisely show your landlord that you have a plan, and articulate the path you see moving forward. Demonstrate the efforts you’ve taken and continue to take to ensure you can pay rent and convey your intent to come up with a repayment plan. Some helpful talking points include:
- If you’ve applied for government aid, such as a Payroll Protection or an EIDL loan, let your landlord know, as well as the current status of your application. Likewise, if you’re pursing charitable grants or other fundraising, tell your landlord. Some landlords are also requiring tenants show business interruption insurance claims, so if you carry such insurance, have that information ready.
- Show the steps you’re taking to continue selling to your customers, to the extent that you are able to under local safety restrictions. Whether it’s mail order, curbside service, delivery, or online sales, it’s important to demonstrate how you’re adapting to the crisis. Also be prepared to document your financial position with sales figures and other data.
- Let your landlord know what that you’re doing everything you can to cut costs and reduce optional expenses. Explain that you’ve reached out to vendors to extend payment deadlines, and other measures you’ve taken to sustain your business, such as staff furloughs or pay cuts.
3. Pay what you can and make a plan for the rest.
If you can pay your rent, you should. If you can’t pay the entire rent, but can afford some payment, ask for a temporary agreement to pay what you can. ABA suggests:
There are three types of rent relief you can ask for:
Rent Reduction. Request a reduction in rent, Common Area Maintenance charges (CAM), or both. Or ask to switch to a percentage rent, or a lower base rent plus a percentage rent.
Rent Deferral. Ask to defer your rent to a later time, or set up a payment plan for back rent.
Rent Abatement. Ask for rent to be forgiven for a set amount of time.
You have to closely review your most current numbers to assess your needs, but ABA believes that a very reasonable request is for rent deferral: no rent for the next two to three months, effectively an interest-free loan, with repayment beginning January 1, 2021. Your situation may warrant that you start by asking for a rent abatement of three months instead. Don’t be afraid to ask big.
In addition to deciding what you’re comfortable with you’ll need to decide whether you want to ask for something specific, or ask your landlord for general relief and see what they offer first. There is no shortage of business school debate about this, but in this case there is an argument in favor of making the first offer; you need this negotiation to be as short as possible, and your first offer can anchor the outcome to your advantage. The scope of this crisis has created a very different climate for negotiations. You are in a good position to ask for relief and your landlord has good reason to try and work with you to come to a satisfactory conclusion for both of you.
Additionally, in some cases tapping into the security deposit is an option. This agreement can allow a landlord to apply some or all of the cash security deposit to rent shortfalls, and could include replenishing the security deposit at a later date, over time, or treating the reduction as a burn-down.
4. You’re not alone.
Everyone is experiencing pain. On April 20, the Wall Street Journal reported that as of April 17, “about 51% of retail tenants had paid their April rent, compared with the 85% who had paid their March rent.” Landlords understand the challenges retailers are facing, and likely have multiple tenants in the same boat. They also understand that they are unlikely to find new tenants during the crisis and its immediate aftermath.
CBLDF Board Member Jen King shares her experience, which demonstrates the importance of good communication:
We were handed a stay-at-home order for our county on March 27th and we had been experiencing an extremely reduced customer flow from the other restrictions given us as the crisis unfolded. As the country was focused on Covid in general, we were focused on preparing to withdraw to the bunkers that are our homes, and so spent time coordinating with our sister store and the pizzeria that shares our space.
Our landlord has always been amazing, and so it took me by surprise when the owner of the nail salon in my shopping center caught me at my truck one morning and told me that she was refusing to pay rent and that I should too. That didn’t seem right, so I messaged the general manager for the center who has always treated me more like family. He thought it a good idea to write a letter to the landlord which he would pass on.
In it I expressed thankfulness for 10 amazing years as we grew into more and more space in his strip-mall. I used the actual wording that I was throwing myself at his mercy, as I would be unlikely to be able to pay rent in the foreseeable future.
His response back was astounding to me, as he indicated that I was the only renter who even remotely asked in a nice manner. Everyone else had a list of demands or told him the way that it was going to be. He thanked me and told me to pay when I could, that he would defer half of each months rent and let me pay it off in future years. While I told him truthfully that I didn’t know what the future would hold in terms of my ability to pay him additional rent over my current rate once things got back “to normal ,” he seemed less worried about that and more thankful that I reached out to even try.
Landlords are people too, with mortgages on their properties that they must pay and families to support. Treating them like fellow human beings and not the enemy makes the most sense to me.
Articulating a proactive path forward, emphasizing that the agreement is temporary and for the good of your long-term relationship, and being transparent gives your landlord incentive to work with you during the crisis.
CBLDF Resources for Comics Businesses
- How to Apply for SBA Coronavirus Disaster Loans – A quick document explaining how to apply for your loan.
- Financial Aid Resources for Comics Industry Businesses – A state by state clearing house of federal, local and private aid to support businesses impacted by Coronavirus closures.
- Financial Aid Resources for Comics Creators & Employees – Benefits and financial aid opportunities for independent contractors and employees who make or sell comics experiencing financial distress because of the Coronavirus closures.
- How the CARES Act Helps Comics Industry Businesses – An overview of the CARES Act and how it helps creators, retailers, and other professionals.
- CBLDF Coronavirus Resources – CBLDF’s clearinghouse of all our tools, training documents, and articles to help our industry through the crisis.
CBLDF is providing resources for retailers throughout this crisis at http://cbldf.org/coronavirusTweet