Action Steps for Negotiating Rent and Other Payments During COVID-19

March 30, 2020
Author: Suzy Levi, NCPT, PMA Board of Directors

With the coronavirus outbreak on the rise, Pilates studios across the world are struggling with a sudden cash-crunch during the ongoing COVID-19 pandemic. Many studios are experiencing difficulty in making payments to their landlords, suppliers, and lenders to keep their businesses afloat. As the outbreak continues, monthly bills will continue to pile on.

It is important now more than ever, to conserve your cash to keep your business in positive cash flow. Below are action steps you can take to negotiate successfully with your landlords, suppliers and lenders.

Review and understand your lease
It is important to know the terms of your lease agreement; this will be key in helping you negotiate what temporary arrangements for payment will benefit your business going forward. Leases can be difficult to understand so having a legal expert review it with you and explain all of the provisions will help you negotiate the best terms.

Initiate contact with your landlord and/or property manager
Review your financial status and update your current business plan to help you navigate during COVID-19 and the crucial 12-18 months following the crisis. Share this business plan with your landlord and inform them of all of the steps you are taking to continue to drive revenue into the business to remain financially stable. This will display to them that you are committed to the long-term solution, making them more likely to negotiate favorable terms with you.

Provide an updated business plan regarding what you are doing in this challenging environment
Be proactive and call them to start the conversation of modifying your payments, terms and conditions. They are likely overwhelmed with managing all of their lenders and tenants and will most likely not reach out to you regarding modifications to your lease. Your initiative will show them you are a committed and conscientious tenant. This will help you in your negotiations.

Here is an example of a studio communicating their temporary virtual business plan:

“We have pivoted to ensure we are doing everything we can to stay financially stable. Here are some services we have added to continue to receive income:”
  • virtual online classes and 1:1 sessions
  • virtual coaching sessions to help clients set up home workout spaces and weekly exercise schedules
  • virtual nutrition programs with individual accountability coaching

Ask for more than you need
In the current COVID-19 stressed business environment, lenders are offering landlords up to 3 months of relief from making loan payments. In exchange, landlords that accept such relief, are generally prohibited by the lender from evicting tenants. The primary motivation for lenders providing landlords this relief is in anticipation of tenants’ inability to make rental payments and to avoid tenant turnover. As the tenant, this means you have some leverage! No landlord wants tenant turnover.

Be prepared to negotiate
The next 90 days are critical. Below is a sample negotiation:

Consider an initial request to your landlord for a temporary suspension of all payments for at least 90 days… including principle, interest, penalties, late fees and adding to it one of the following options:
  • Extend your original lease 90 days to make up for the deferred payments.
  • Add a % to your rent payments starting monthly in September 2020 based on your monthly gross revenue to make up for the 90 days abatement of payments.

Remember: Landlords/property managers want to keep you as their tenant. Most likely, you have established some credibility and the last thing they want to do, especially at this time, is look for a new tenant. Your interests are highly aligned with the interests of the landlord and the lender, so don’t be afraid to ask for what you need to survive this crisis and to be sustainable going forward.

Identify other loans and lines of credit
If you have an equipment loan, small business loan, line of credit or any other financial obligation from a lender, reach out to them to work out a payment plan. They will most likely work with you by renegotiating. This is an unusual circumstance and they are probably receiving support from their lenders which puts them in a position to modify your payments and terms of your loans.

Examine all other operating expenses
Look at your recurring expenses and divide them into essential and non-essential payments for keeping your business operating under your current status. For example, if you are closed for in-person visits, suspend things such as; energy and utility bills, water deliveries, cleaning wipes, and studio cleaning services. Essential services such as your software operating platform, payment processing, internet, and mobile phone contracts are vital in conducting business and communicating with clients. You will need to prioritize making those payments.

As the COVID-19 crisis continues, programs are being implemented at the federal and state government level to protect small business owners and help their businesses survive the pandemic. It is important to stay up to date with the available assistance programs and offerings for your business. Also stay connected with your local Small Business Administration office and continue to check what assistance is being offered for small businesses at the local and federal government level to help you navigate in this uncertain time. Staying positive and being proactive will help you weather the storm so when the crisis is over, you can continue to offer the same great customer service and programming to your clients.  

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Category: Business