Small business' rent problem amid coronavirus crisis
Illustration: Aïda Amer/Axios
Small businesses can lay off or furlough employees if they are forced to close for the duration of a lockdown. They can stop buying goods from vendors. They can even stop paying their owners. But they still owe rent.
The big picture: If no money is coming in, then most businesses won't write those rent checks. Some will simply fall behind; others will take advantage of formal rent moratoriums. Either way, the problem just gets kicked down the road, creating a nasty past-due rent liability.
What to watch: France has announced that it will suspend rent and utility bills for small businesses. So far, that doesn't seem to be something the White House is considering.
- Few if any U.S. landlords will be willing or able to start eviction proceedings in the midst of the crisis. But once businesses start to reopen, nearly all of them will try to collect on back rent.
- In the case of small businesses paying below-market rents on a long-term lease, the landlord could get quite aggressive.
The bottom line: At some point, the U.S. government will have to step in to adjudicate these disputes. It might even have to pay some of the back rent itself. Or, it could follow hedge fund manager Bill Ackman's advice and just give everybody in the country a 30-day rent holiday.
Go deeper: The investor's guide to coronavirus