Facilitating Flexibility with Business Owners and Commercial Landlords

COVID-19 and related restrictions have made it necessary for many business owners and commercial landlords to evaluate options and create some measure of flexibility. “These discussions require both sides to assess a variety circumstances and issues, many of which are in a state of flux due to the uncertainty of COVID-19,” cautions real estate and finance attorney Steve Ostrow. He outlines some short-term options:

  • Rent Relief: Deferral versus abatement of base rent only or all rent including a tenant’s share of pass-through obligations for operating expenses and real estate taxes.
  • Rent Repayment: Repayment schedule for deferred rent including appropriate acceleration triggers for earlier repayment due to future lease defaults or adverse events such as a tenant’s permanent closure of its business, bankruptcy filing or loan default.
  • Tenant Assurances and Reporting and Landlord Forbearance: Arrangements addressing a tenant’s obligations to mitigate business interruptions and resume full operations; tenant reporting to landlord of ongoing financial condition, operating status and receipt of financial assistance under governmental relief laws; tenant and any guarantor providing additional security to landlord; and landlord forbearance.
  • Modification of Operating Clauses, Etc.: Temporary suspension or modification of operating covenants, co-tenancy, kick-out clauses and other lease terms.
  • Third Party Consents: Landlords and tenants obtaining required consents to lease modifications and rent relief from lenders and other third parties.

In a recent virtual town hall hosted by MassMutual and The Business Journals, Chris Vanderzyden (CPA, CEPA, principal, Legacy Partners, LLP.) shared this advice about proactive B2B communications with landlords (as well as banks and vendors).

Every business owner should be in contact with all stakeholders continuously when in crisis. All phone calls should be followed up with emails in order to memorialize all discussions. Any changes in terms should be documented in writing. Recognize in your communication that your banks, vendors, landlords are mostly likely in crisis too, so expect the discussion to be a negotiation in search for a win-win for both sides of the table.

A [landlord], vendor, or supplier would much rather negotiate in advance terms that can be managed as opposed to a complete default. A business owner should be ready to present a solution that will help them and be supported with financial information. Again, expect the resolution to be a compromise on both sides.

If you are considering buying or selling a business, lease negotiations will likely be an important aspect of the interaction. According to Jeffrey D. Jones, ASA, CBA, CBI | President of Advanced Business Brokers, Inc.,

Lease negotiations with the landlord and/or the current tenant will be necessary to make deals happen. From a landlord standpoint, areas of negotiations include offering some free rent time, deferring several months of rent payments to the back end of the lease, or offering to lower the rent for some specified period of time. At the very least, asking landlords not to raise the rent over the current amount even though the lease may have automatic rent increases specified in the lease. Getting little or no concessions from the landlord may require the seller to offer creative financing alternatives to the buyer and/or offer to subsidize the rent for some specified period of time.

An experienced broker and business advisor can be instrumental in helping to navigate the choppy waters in which we find ourselves, and to facilitating cooperative outcomes. Contact us for support.

 

Financing a Business: 4 Options Evaluated

male accountant using calculator

Before leaping into a new business opportunity, most entrepreneurs face the challenge of securing working capital. Although it’s not an easy task, it is essential to getting your idea off the ground. It’s also not a decision to take lightly, as the choice you make will stick with you for years to come, even after your business starts making a profit. You can set yourself up for a win by researching the different avenues available and deciding the best action for your specific needs. Here we evaluate four of the more common options owners consider when deciding how to finance a business.

How to Finance a Business

When it comes to business financing, there isn’t a right or wrong answer. Business owners must take their situation into account to plan for the best possible outcome.

Small Business Loan/SBA Loan

Last year, 43% of small businesses applied for a loan from a small business lender. Bank loans and lines of credit are a popular business financing choice for a good reason. They’re a reliable source for a short-term loan that allows you to grow. But, you want to be selective when choosing who to finance through. Banks, private equity firms, microlenders, and other venture capitalists are concerned with getting their money back, so they tend to charge high-interest rates. If you have a good credit history, you can do some shopping around to find better rates. Also, be sure to apply for loans through the U.S. Small Business Administration. They tend to have more flexible terms and lower interest rates.

Angel Investor

We commonly see business owners acquire capital from an angel investor in exchange for an equity position. This is often sought by businesses that lack the cash flow needed to obtain a traditional bank loan. It’s less risky than taking a business credit card or a short-term loan. But, it comes with other setbacks that some aren’t willing to look past. Equity financing means forfeiting some control to a partial owner and granting this person a say in the business’ operations. Additionally, this person will receive a share of profits if you decide to sell. For this reason, you’ll want to make sure you can work well with this person for the long haul.

Crowdfunding

Crowdfunding is an increasingly popular option, especially amongst business startups. Rather than acquiring a business loan from one financial institution, some business owners choose to raise small amounts of funds from a large number of people. Over 600 crowdfunding platforms exist, where billions of dollars are raised annually. Typically, the more successful crowdfunding campaigns offer something in exchange for a donation. Whether that’s exclusive member access or a free product/service, it’s good to come up with ways to incentivize your donors.

Personal Investment/Borrow From Friends and Family

The last business financing option we’ll touch on is actually the one you should start with. Before seeking external funding, it’s best to try to raise as much as you can on your own. You should never put up your entire personal savings; you never know when an emergency will arise, and you’ll need cash-on-hand. But, again, lines of credit can be costly with high-interest rates. If you can cover a lot of business needs yourself or seek a low-interest loan from friends and family, you can save in the long run.

Acquiring a small business loan is a big step in the business buying process. You’ll need to make sure you can afford the monthly payments and have a good enough credit score to be accepted for a loan program. Contact us for more information on business financing and help with preparations.

Resource Roundup – 8 Reopening Strategies for Businesses

Businesses reopening amidst uncertainty regarding regulations and safety are facing some challenging operating decisions. The U.S. Chamber of Commerce shares these eight strategies to reopen safely.

Beefing up delivery, takeout and curbside

Restaurants and retail stores have been hit hard by COVID-19, so those operations are making big changes to try to survive this challenging environment.

In the restaurant world, many joints reopening are keeping dining rooms closed (even if they are allowed to open), and instead they’ve added improved delivery and takeout options to better serve wary customers. For example, in Georgia, restaurant dining rooms are allowed to reopen, but many noteworthy restaurants have created robust delivery and takeout options.

As for retail stores, they are beginning to test out new ideas such as curbside pickup. For example, the Mall of America in Minnesota now “offers curbside service from over 20 retailers, including Nordstrom, Legacy Toys, and Cinnabon” with two pickup locations.

Converting shared spaces into enclosed ones

While open-office plans have been all the rage in recent years, these types of offices often don’t offer enough separation to meet new social distancing standards. This may encourage many large office buildings to return to cubicles or add plastic dividers between desks that can create a similar separation effect. Some businesses are predicting new dividers could be as tall as 80 inches high to isolate germs.

“You’re gonna see a lot of plexiglass,” Michael Boonshoft of real estate company Cushman & Wakefield, which is helping offices prepare for this new office reality, told Wired. “Having that divider will make people feel safer. That shield between desks will be really important.”

Extra sanitation

Health concerns remain top of mind while the threat of COVID-19 remains, so many businesses that are reopening are touting extra cleaning and sanitation. Bed Bath & Beyond, for example, has said its locations will provide cart wipes and hand sanitizer dispensers in its stores as part of its enhanced cleaning protocols. Its employees will be also be required to wear masks and practice social distancing.

COVID-19 testing for employees

One way some large employers plan to reopen with some sense of security is by providing COVID-19 testing to employees. For example, Station Casinos in Las Vegas has announced a free testing program with the intention to test all 14,000 of its employees before they return to work. On a larger scale, Seattle-based Amazon has announced it is setting up a system for testing workers around the U.S.

One strategy to open offices around the country is to do it slowly, with waves of employees allowed to come back at a time.

Gradual re-entry to the workplace

One strategy to open offices around the country is to do it slowly, with waves of employees allowed to come back at a time. West Palm Beach, Fla.-based clothing brand U.S. Polo Assn., plans to invite five or six employees back in its first wave.

“We’ll start with a handful of people, and evaluate the week, and add a few more people,” J. Michael Prince, President and CEO of U.S. Polo Assn and U.S.P.A. Global Licensing Inc., told WWD. “I don’t think we’re fully functional until mid-June.”

Staggered work shifts

One way reopened companies have made social distancing easier has been to create staggered shifts, so fewer people are working or socializing in tandem. One high-profile example of a company using modified shift scheduling is Boeing, which has implemented staggered shift times for employees returning to aircraft assembly plants in Washington state. The aerospace company also said it would spread out workers more to allow them to socially distance and require them to wear masks.

Requiring workers/customers to wear masks

While various state and local governments are requiring masks for people who can’t social distance, some stores and offices are requiring masks for workers and customers as well in order to safely reopen. For example, Dunedin, Fla.-based Achieva Credit Union said it will require all employees to wear masks in all communal areas, but face coverings won’t be necessary in cubicles.

Temperature and health checks

As fever is one of the most common symptoms of COVID-19, temperature checks are a relatively simple way to make sure sick employees can’t come into the office or sick customers can’t come into your place of business. While this has not been widely adopted yet, some businesses have added or announced temperature checking.

Southfield, Michigan automotive parts supplier Lear Corp., which has developed a manual for safely reopening manufacturing facilities, said all of its employees will receive health screenings and contactless temperature checks when entering buildings at the start of their workdays.

One prominent example of temperature checks for customers comes from Frontier Airlines, in order to attract people back to a safer environment. Travelers flying on the airline will have their temperatures checked before boarding starting on June 1.

Opportunity: Sign of the Pampered Maiden

Sign of the Pampered Maiden in Santa Fe for SaleSign of the Pampered Maiden is an iconic, enduring brand and luxury fashion destination in the heart of downtown Santa Fe, and it could be yours. A dramatically reduced price and supportive SBA programs make this a perfect opportunity to become part of the Santa Fe retail and fashion identity.

Now listed at only $180,000, Pampered Maiden’s 2019 gross revenue was $615,266, with a cash flow of $74,417. Find more information about this exceptional opportunity here.

Pampered Maiden’s collection of organic, eco-sensitive and locally-sourced clothing has won it a loyal customer base. The classic sensibility and emphasis on quality has attracted women of multiple generations. Visitors and locals alike have made a regular habit of shopping at Pampered Maiden to seasonally refresh their wardrobe.

The shop’s reputation for customer service also sets it apart. Staff is skilled at providing a personalized shopping experience and expert at visual merchandising. Santa Feans consistently rank Pampered Maiden as one of the top stores for women’s clothing, jewelry, fashion accessories, and gifts. It has been featured in the pages of The Santa Fe Guide, The Essential Guide, Trend Magazine, In-Art Design Magazine, and other local publications.

Additionally, the current owner has invested in upgrading Sign of the Pampered Maiden’s online presence. A newly updated e-commerce site and enhanced social media are important adaptations and bring the brand great sustainability and growth potential.

To help secure a smooth transition, the Seller will make personal introductions between vendors and new owners. If desired, she will accompany new owners on the initial trade shows and major buying trips. A top-notch staff also helps make this business easy to operate.

 

 

 

 

Resource Roundup – Reopen Checklist for Businesses

Gov. Michelle Lujan Grisham announced last week that some businesses can begin to reopen (in modified form) and that others might be able to on May 15. To help businesses prepare, the Santa Fe Chamber of Commerce shared this useful checklist:
  • Determine the square footage of your business and know how many customers can be inside the space at one time. Under possible new guidelines, businesses could be limited to 20% of your maximum capacity.
  • Consider how you will control access. How will you control deliveries, customers and visitors? Develop a plan for different areas of your business with safety and cleaning protocols. Under possible new guidelines, businesses could be asked to have designated entrances and separate exits.
  • Create a social-distancing plan to decrease density and rethink traffic patterns. Consider the possibility that you may have to install plexiglass shields at each point of sale area and/or floor signage that designates the appropriate wait line distancing.
  • Reduce touch points by leaving doors open, not requiring signatures on transactions, etc. There may be a need for additional cleanings between shifts or even between customers based on foot traffic into your business.
  • Will you need PPE for your employees, and can you purchase them?
  • Consider signage encouraging customer facial covering.
  • Have sanitizers available at entrances to your business.
  • Prepare to train staff for any new protocol.
These are just a few suggestions to consider, as we move forward in opening Santa Fe businesses.

Resource Roundup – NM Lenders Available for SBA Loan Applications

Lenders in New Mexico are still able to help businesses with loan applications for the U.S. Small Business Administration’s Paycheck Protection Program (PPP), Economic Development Department Cabinet Secretary Alicia J. Keyes said in a recent virtual roundtable discussion.

As reported, Congress appropriated another $310 billion for crisis relief funding last week. As part of that bill, about 20 percent of the money ($60 billion) was reserved for small banks and community lenders. Applications reopened on April 27.

During the roundtable last Friday afternoon with the EDD Cabinet Secretary Alicia J. Keyes, U.S. Rep. Ben Ray Lujan, D-New Mexico, said there was about $200 billion left for PPP loans, “but this will go quickly.”

Rep. Lujan added that nearly all the community banks and credit unions in New Mexico “have completely cleared their backlog, and most of the community lenders are soliciting new loan applications and taking on new customers.”

“There are still lenders in New Mexico that have lending capacity, especially among the community banks and federal credit unions,” said John Garcia, New Mexico District Director for the U.S. Small Business Administration.

“For New Mexico to have a full recovery we need businesses to be healthy,” Secretary Keyes said. “I would urge any businesses who have not yet applied for SBA assistance, to do so.”

As of April 29, the U.S. Small Business Administration (SBA) has approved over 960,000 loans in the second round of the PPP. The dollar value of those loans was $90 billion, with smaller banks accounting for 587,000 loans or 61 percent of the volume.

The average loan size for round 2 of the Paycheck Protection Program is $95,000 compared with $206,000 in the first round of the program, according to the SBA’s New Mexico Office.

For SBA program information go to SBA.GOV

For a list of qualified SBA lenders in the state go to the EDD COVID-19 Resources page or click here.

For information on all the state and federal emergency economic assistance, go to the EDD website, GoNM.biz

For comprehensive statewide information on the COVID-19 health emergency, visit NEWMEXICO.GOV.

 

 

 

Note: This is a summary of aggregated information from other parties and does not express the direct advice of Sam Goldenberg & Associates.

 

Resource Roundup – 6 Tips Protect Your Business in 90 Days

There can be no way around it, Inc. contributor Brian Hamilton’s April 2020 COVID-19 centered article, “6 Actions to Take in the Next 90 Days to Save Your Business,” isn’t pulling any punches. Hamilton, Founder of the Brian Hamilton Foundation, believes that the next 90-days could be make or break days for business owners looking to navigate the choppy waters of the COVID-19 pandemic. His latest Inc. article provides readers with 6 actions they should take now to survive the economic fallout of the COVID-19 pandemic.

Tip #1 Vigorously Control What You Can

Hamilton’s first tip is to “Vigorously control what you can. Vigorously ignore what you can’t control.” As Hamilton points out, you can’t control the economy; instead, you need to focus on what you can control. His view is that there has never been a more important time to focus, “More than ever, you’ll need to go to war with things within your control.” Now is the time to exercise control.

Tip #2 Guard Morale

During tough economic times, employee morale can be a real issue. This brings us to Hamilton’s second point, “guard employee morale.” Significant drops in employee morale can lead to serious problems with your business, which is exactly what you don’t want to see right now. Hamilton notes that you have to be the general that helps his or her troops rise above potential panic.

Tip #3 Preserve Cash

Hamilton’s third tip is to “preserve cash where you can.” He states, “Right now, your motto should be: Live to fight another day.” The pandemic means that you need to keep expenses down and watch every dollar. No one knows what the next few months, or the next couple of years, could have in store.

Tip #4 Be First in Line

“Be first in line,” is Hamilton’s fourth point. Hamilton wisely pushes business owners to be the first in line for government assistance. This is very good advice, as SBA and other funds are likely to be limited.

Tip #5 Get Back to the Basics

Fifth, Hamilton recommends, “Get back to the basics…starting with monomaniacal customer service.” As always, customers, whether existing or new, are the lifeblood of your business. You can’t afford to lose customers now and for this reason, you need to have a laser-like focus on customer service.

Tip #6 Pivot your Product or Service

Hamilton’s sixth tip is to “Pivot your product or service to new conditions.” Small changes to your business can open up new streams of revenue. Even if these streams of revenue are comparatively small, they could mean the difference between sink or swim! Try to step back and look at your business with fresh eyes and strive to find ways to offer something new to your customers. Whatever you offer should be based on your existing goods and services and not require a new, large expenditure.

The COVID-19 pandemic is obviously disruptive, but it won’t last forever. Hamilton’s advice of focusing intensely on the next 90 days is sound advice. You won’t regret looking for ways to safeguard your business for the next 3 months.

Resource Roundup – Marketing and Communications in the Time of Covid

In a moment of totally disrupted customer experience, marketing efforts risk coming across as not only irrelevant but downright crass. How can businesses continue to communicate with customers and share value? Focusing on mission statement and values in order to re-enforce marketing strategies is more important than ever.

Information is Crucial

Each customer purveying your business’s website needs to understand your hours of operation, any limitations to service and what is being done to ensure cleanliness.  Providing this information establishes your precautions, which are appreciated (and in many cases mandated!) during this time. Communicate how your business is supporting employees, donating to charities, or offering discounted or free products.

Utilizing the Customer’s Time

Most customers are adhering to social distancing guidelines put forth by their state and the federal government.  Now, more than ever, it is important to exhibit to your customers how your brand can be utilized beyond your brick and mortar.  Thinking beyond your storefront to put your service or product into your customer’s virtual hands is important. For instance, universities are beginning to offer free online classes and telecommunication companies are offering two months of free service to low-income families.

Empathy and Action

By each passing day, customers are looking for new stimulation to help the time go by at home. Movie companies are making the best of the situation by sending theatrical releases to online streaming services.  It’s not necessary to always make your customers laugh, but it might be within your branding to aim for content geared towards warmth, humanity, and empathy.

The metric for engaging your customers is moving beyond views and shares to quality feedback or social impact on your community.  Do not bite off more than you can chew. Diligently signaling, meaning declaring a set of values, but not following through on the actual deeds.

Also, this is a fantastic opportunity to consider your marketing strategies when this crisis ends.  What will your business look like once you are able to open the doors?  How are you able to stay relevant with your competitors?  These are all questions needing answers, but today we must do our best to accomplish what is in front of us.

Golden Age of Business Acquisitions?

Business acquisitions are red hot, and all kinds of businesses are being snapped up.  Some people are under the impression that only large businesses are being acquired, but this is far from the reality of the situation.  It would surprise many to learn that so much of the “action” is, in fact, small businesses buying other small businesses.

In his Forbes article, “Take Advantage of the Golden Age of Business Acquisitions,” author Christopher Hurn explores the true state of the “acquisitions game.”  His conclusions are quite interesting.  In Hurn’s opinion, there has never been a more active time in the realm of business acquisitions.

“While it might be more interesting for media outlets to watch how two multinational pharmaceutical companies, for example, jostle for position during a big-time M&A deal,” Hurn writes, “many acquisitions will be done on Main Street as one small business acquires another.”

If you own a business and are looking to grow, then you may want to consider acquiring a competitor in order to consolidate the market.  As Hurn points out, there are many reasons that you might want to consider acquiring a business in addition to consolidating the market.  These reasons include acquiring a new product or service, acquiring a competitor that has superior technology or even identifying a business that you believe is primed for substantial growth.

Yet, there are other forces at work that are combining to make this moment the “golden age of acquisitions.”  At the top of the list of why now is a good time to investigate acquiring a business is demographics.  According to a 2019 study by Guidant Financial and Lending Club, a whopping 57% of small business owners are over the age of 50.  The California Association of Business Brokers has concluded that over the next 20 years about $10 trillion worth of assets will change hands.  A mind-blowing 12 million businesses could come under new ownership in just the next two decades!  As Hurn phrased it, “The stars are aligning for the Golden Age of business acquisitions.”

This all points to the fact that now is the time to begin understanding what kind of acquisition would best help your business grow.  Hurn believes that turning to the Small Business Administration in this climate of rapid acquisition is a savvy move.

In particular, he points to the 7(a) program and a host of reasons that the SBA can benefit small businesses.  Since the SBA lowered equity injection requirements, it is now possible to finance a staggering 90% of business acquisition deals with loan terms up to 25 years and lower monthly payments.  Additionally, the SBA 7(a) program can be used for a variety of purposes ranging from expanding or purchasing an existing business to refinancing existing business debt.

Hurn truly does have an important insight.  Baby Boomers will retire by the millions, and many of them will be looking to sell their businesses.  With 12 million businesses scheduled to change hands in just the next 20 years, now is a highly unique time not only in the history of acquisitions but also in the history of business.

We understand what is involved in working with the SBA and acquisitions.  A seasoned business broker can point you towards opportunities that you may have never realized existed. Contact us to learn more!

LET IT GO? SHOULD YOU SELL YOUR FAMILY BUSINESS?

When the variable of family is added to the equation of selling a business, the situation can get rather messy.  Family usually complicates everything and businesses are, of course, no exception.  Ken McCracken’s recent article “Family business: to sell or not to sell?” 6 questions to help you make the right decision,” seeks to decode the complexities so often associated with family businesses.

Consider the Market 

The foundation of determining whether or not now is the right time to sell must begin with market forces.  Determining how much your business is worth is a key variable in any decision to sell.

The best way to determine the worth of your business is to have an outside party, such as a business broker, evaluate your business.  What you believe your business to be worth and what the market dictates could be very different.  You may discover that your business does not have the value that you hoped for.  If this is the situation, then selling simply may not be an option.

What is Next for You?

Tied to knowing your market value is understanding what you will do next after you sell your business.  For example, do you have a family member who can run the business without you?  What will you and any family members who work for the business do after the sale goes through?  You may discover that the sale could be very disruptive for you personally.  All too often, people fail to recognize the emotional and mental stress that comes along with selling a business.  Many owners begin the selling process only to discover that they are not emotionally ready to do so.  While everyone wants to be unemotional in making their business decisions, this is not always the case.

Due Diligence

You will also need to deal with the issue of due diligence.  Working with a business broker is an excellent way to handle the due diligence process.  Business brokers usually vet prospective buyers ahead of time, which can save you a great deal of aggravation and wasted time.

McCracken believes business owners should investigate how the prospective buyer handled previous acquisitions.  Specifically, McCracken believes that business owners should look to how well the prospective buyer honored previous commitments, as doing so is an indicator of how trustworthy a buyer may be.

Planning for Negotiations

Finally, McCraken believes it is essential to know who will oversee negotiations.  It is key to note that many deals that could have otherwise been successful, fall apart due to poor negotiations.  A business broker can be invaluable in negotiations.  After all, who wouldn’t want someone with dozens, or even hundreds, of successful transactions advising them?

Selling a family business can be emotionally charged and can cause significant life changes for not just you, but for members of your family as well.  Often, family businesses were built up over a lifetime or even over generations, which can make the decision to sell quite emotionally charged. Contact us for help navigating the challenges that come with this opportunity.