SMEs were hit by backrent demand amid high inflation

For small and medium-sized businesses in the United States where rent is paid, and at a very unsuitable time.

The landlord was tolerant of paying rent for the first two years of the pandemic. Many people are now looking for back rents, and some are raising their current rents. Meanwhile, most government aid programs that helped SMEs overcome the pandemic ended while inflation was pushing up supply, transportation, and labor costs sharply.

Martin Garcia, owner of the Gramercy Gift Gallery in San Antonio, Texas, survived the first part of the pandemic by paying the landlord monthly rent. And in August 2021, after the federal moratorium on evictions of peasants ended, his landlord demanded the full amount of his backrent.

"I needed $ 10,000 in 15 days," Garcia said. He took every loan he could find (often at high interest rates) and barely met the deadline.

A strong vacation season helped pay off his loan, but sales have fallen so far this year and he used credit card loans to pay his rent in June. Garcia believes that some of his customers are cutting down on non-essential things because they can afford to pay high prices for gasoline and other necessities.

According to a survey by Alignable, a small business referral network, 33% of all US small businesses failed to pay their May rent in full and on time from 28% in April. .. 52% also say that rents have risen over the last six months.

"Many SMEs are still frankly recovering whatever the final stage of COVID is," said Chuck Cust, Head of Corporate Communications at Alignable. "In addition, they are coping with the increase in inflation over the years, which makes it difficult for SMEs to actually do it."

"In sustainability No "

Ris Lacoste owns the restaurant Ris in Washington, D.C., which floats with the help of the Restaurant Relief Fund to pay the rent. However, the money must be spent by March 2023. To reduce corners, she refinished the table to reduce linen costs, did not print color copies of the menu, and worked with 22 staff instead of the former 50.

Before the pandemic, the 7,000-square-foot restaurant was full, but not "returned to full." At the same time, inflation is exacerbating the cost of doing business.

"Salaries go up, labor goes up, goods costs go up, utility bills go up," Lacoste said. "I wear 20 hats instead of 10, and work 12 hours a day, 6 days a week."

But rent is not under her control and it's stressful To increase.

"You work for the landlord, how much do you want to do it, how long will you survive," she said. "It's not sustainable."

Inflation dilemma

Commercial real estate lending and advisory firm Marcus & Millichap data&Millichap is in the first quarter of 2022 Rents show a 4.6% increase in vacancy compared to the same period last year. The rate fell to 6.5%, the lowest since before 2015. But Marcus&Millichap's national director of retail sales, Daniel Taub, said inflation would make it harder for landlords to impose rent increases as consumers began to feel oppressed.

"Consumers can spend a lot only when the dollar isn't too far away, and retailers have enough inventory to carry space and pay employees. You can only pay so much for it, "he said. "It's a tough retail market and something will have to give."

Charlene Ferguson owns a building that houses the technology business he owns with her husband. I am. Guy in Wylie, Texas. She also has 13 tenants, so she sees the dilemma from both a small business and landlord perspective.

During the pandemic, Ferguson agreed to rent a moratorium to her renters, from massage therapists to churches. When things started to resume, she worked with the tenant on a backrent. They all caught up within three months, except for the church where she allowed her debt.

However, as of May she had to raise her rent by about 5% to keep up with her own costs of maintaining her building. Utilities, cleaning supplies and property taxes are rising. So far, she hasn't lost her tenant.

"I did just enough to cover the increase, I didn't do any more," she said. "We don't make much money, but we keep people in business."

Doing business online

Some small businesses have higher rents I can not do it. Solution: Move to remote.

Alec Pow, CEO of ThePricer.org, which has eight employees in New York, said he plans to raise rent by 30% when the landlord renews his contract. POWs expected a slight increase. The landlord said there are tenants who will receive the lease in full as requested.

So Pow lost his office and decided to work remotely for two months while New York staff were looking for a cheaper space. We also have one office in San Francisco and two in Europe.

"We were in the process of raising employee wages to counter rising inflation," he said. "Our annual budget couldn't afford both of these costs, so we had to choose between them."

In:
• Economy
• Texas
• Gasoline Price
• Inflation