The Current State of Small Business Rent Inflation and How Funding Options Can Help
One-third of small businesses?couldn’t afford to pay their rent?in the last six months. And more than half of renters have seen a commercial rent increase. If you’re wondering how we got here and the ways small business funding can help, that’s where Globelend Capital & Blue Chip Servicing Inc comes in.?
This article examines why inflation is hitting the commercial real estate market, how tenants and landlords are both affected, and what you can do if you’re a small business struggling to pay rent.?
Why Is Inflation Hitting the Small Business Rent Market?
It’s been two-and-a-half years since the pandemic started. Landlords have been more flexible these past few years if their tenants were unable to pay rent — partially because it was the law. President Joe Biden put a law in place that stopped landlords from evicting their tenants during the pandemic. But in August 2021, the?Supreme Court voted to end that law. Landlords were then free to require small business tenants to pay back rent or face eviction.
Additionally, the government aid that kept many small businesses afloat at the start of the pandemic has run out. You can no longer apply for the?Paycheck Protection Program?(PPP) or?Economic Injury Disaster Loans?(EIDL).?
Tack on the?highest economic inflation since 1981?and supply chain issues, and you have a situation ripe for small business rent inflation. Everything costs more, from gas prices to labor to utilities to supplies. Commercial real estate is just another item on the list.
Another possible cause of commercial rent price increases has been around for years. Some commercial leases have a consumer price index (CPI) provision that states that rent will follow the increases to the cost of living (CPI is another way to say inflation). As mentioned, inflation went up significantly from May 2021 to May 2022. So if your lease has a CPI provision, your rent prices could increase alongside the cost of your inventory.
Examining Rent Inflation in the Consumer Lease Market
Residential housing is also affected by rent inflation. The U.S. is in the midst of an affordable housing crisis — and we need to add almost seven million?affordable homes and apartments?to escape it. On a national level,?rent prices have skyrocketed by over 14%?in the last 12 months. The Federal Reserve?predicts rents to rise another 3.4%?in both 2022 and 2023.
All of this adds up to a situation where it’s more expensive to rent an apartment or a home today than it was a year or two ago.?
Currently, there is more federal assistance in the residential space than in the commercial space. For example, the national?Emergency Rental Assistance Program?aims to help families stay in their homes by helping with rent or utility payments.
Tenant and Landlords: Two Sides of the Same Coin
Landlords may not be increasing their costs simply because they want to price gouge their tenants. Instead, they are likely also facing increased costs. Landlords are spending more to maintain their properties for things like cleaning, utilities, and more expensive property taxes.??
It also costs an average of?$3,500 to evict a tenant?for expenses like legal fees, court costs, and lost rent — not to mention lost time. So it makes sense that landlords and small business tenants would want to work together to find a solution.?
Some options are:
The Worst Places Hit With Business Rent Hikes, Geographically
Rents have increased all across the United States, but many of the metro areas are among the hardest hit. Cities in Florida, like Miami and Orlando, along with Tucson, Arizona, have seen the?biggest rent increases?in the last year. Other cities that top the list are San Diego, Nashville, New York, and Austin, Texas.?
It may come as a surprise because of its notoriously high rent cost, but San Francisco is the slowest-growing metro area in terms of rent prices since the start of the pandemic.
What Can Small Business Owners Do to Ease the Rental Inflation Burden (Besides Going Remote)?
Many small businesses rely on brick and mortar locations or in-person offices to function, so going remote isn’t an option. But if paying your higher rent has become an issue, there may be solutions for you.?
First, you can try to work something out with your landlord using one of the options we described above. If that doesn’t work, check with your state or local government to see if there are assistance programs that can help. Local programs may be able to offer emergency assistance so you can pay rent.?
You can also seek legal aid from an attorney that can help you to understand or negotiate your current lease or a new lease. Negotiating for a long-term lease may help decrease your monthly payment. There are affordable legal options available online through companies like?LegalZoom?and?RocketLawyer. If you’re based in New York, check out the nonprofit-led?Microenterprise Project?that can connect you to pro-bono help. Otherwise, look into your state’s bar association for referrals to low-cost attorneys.?
Additionally, you may be able to?deduct your business’s rental expenses?on your taxes. While this doesn’t help you pay your rent immediately, it’s worth keeping in mind for future planning. If you need to end a lease, you may also be able to deduct the associated costs on your taxes.
Finally, consider turning to business funding to increase your business’s access to cash. For your best options, see our guidelines below.
Funding Options for Commercial Real Estate Leases
Small business owners and entrepreneurs can work with lenders to ease the strain they face as they try to manage rent payments each month. Financing can be a fantastic way to help pay your business’s rent as long as you understand the fine print. Some options are:?
This is our?***CURRENT PRODUCT LINE*** :
?? REVENUE BASED FINANCING ??
Min $20,000 Max $2,000,000 Performance Driven Program, Low Credit Score OK
VERY POPULAR
?? SBA 7A & SBA 504b LOANS ??
Max $5,000,000 up to 25 years with 504B, May need Real Estate for collateral
Max $350,000 up to 10 year with 7A, monthly payments, low rates
领英推荐
?? SBA 7A EXPRESS LOANS ?? - BRAND NEW SBA EIDL ALTERNATIVE LOAN
Max $150,000, up to 10 years, NO PPP, No Cashflow Requirements, can Get Up to 3 Loans Per Year, FUNDS WITHIN A WEEK
?? TERM & REVOLVING LINE OF CREDIT ??
Min $20,000?Max $10,000,000, up to 10 years, No Real Estate or Equipment needed for collateral
Weekly and monthly payment options, competitive rates
?? Commercial Real Estate Loans ?? - United States - On the commercial side, we can offer almost anything if credit & income is there to support the loan. If a loan is over $150,000, we can do 100% Financing. If you want to purchase raw land & build on it, we offer a 50% ltv on the land & 100% of the construction & building of the building. We can do SBA acquisition loans as well as equipment leasing. We offer seconds on commercial properties.
We are going to be rolling out several new products within the next month:
?? Grants ???
State, Federal, Minority etc.
?? Business Credit Building Services ???- GOING LIVE MID JULYAccess to Business Financing without using your Social Security Number and Personal Guarantee or Liability, Completely separate from Personal Credit Profile therefore doubling your ability for financing, Startups can take advantage
Each of these options comes with pros and cons, which we explore below to help you decide which type of business funding is right for you.?
Small business loans for rent charges
Term loans can help you cover immediate business expenses and are usually flexible enough to be used for rent. These may offer lower interest rates than other options but can be more difficult to qualify for than other options, depending on the lender.
All we need to get started is the following:
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1.?????USE PROMO CODE: 118 –?Submit Application
2.?????Schedule Consultation?(if applicable)
3.?????Last 6 months Business bank statements
4.?????Last 2 years Business Tax Return?(only need if asking for more than $50,000)
5.?????Last 3 months Credit Card Processing statements (if applicable)
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Once we receive the aforementioned financials and application, we will do our due diligence and prepare a game plan for your business.
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Thank you!
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Paul Damiano
Business Growth Specialist
Cell: 954-790-3338
Submit Application?-?USE PROMO CODE: 118