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Half of Small Businesses Haven’t Paid Full April Rent, Early Poll Suggests

Bills become out of reach as coronavirus forces companies to close and customers to stay at home

About half of U.S. small businesses haven’t paid their full rent or mortgage yet this month as a result of the coronavirus pandemic, a new survey suggests.

In the poll, conducted on Thursday and Friday by Alignable, a small business social networking company, about 30% of the more than 1,000 respondents reported making no rent or mortgage payment in April, while 20% said they had made only a partial payment.

The remaining half reported paying their entire rent on time. Only a quarter of respondents said their landlord or bank offered a reduction or deferral on what they owed. The survey was of companies with up to 50 employees, including retail, restaurant, auto-repair and other small businesses.

The preliminary findings illustrate  the crisis affecting small businesses  and how their troubles could set off a financial chain reaction that could inflict heavy damage on landlords and lenders across the U.S.

“I think this shows the time-sensitive need for the policy response to get liquidity in the hands of small businesses,” said Michael Feroli, chief U.S. economist at JPMorgan. “Half of all small businesses have only 15 days or less worth of cash buffers, and with shelter-in-place orders likely to persist they will need to replace lost revenue in a hurry.”

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An estimated $20 billion in monthly retail real estate rents are due as early as this week, according to Marcus & Millichap, a commercial real estate services and consulting firm.

The coronavirus outbreak has brought many mom-and-pop operations to a standstill, with reduced foot traffic and orders to stay at home making it impossible to continue running many types of businesses.

APARTMENT RENTERS UNDER PRESSURE

With millions of unemployment claims reported this week, many American home renters are expected to miss payments in April.

Housing advocates and real estate lobbyists have been asking the federal government for emergency financial assistance for renters. Landlords told The Wall Street Journal they will have a better idea how many people are failing to pay rent in the next two weeks.

One study of rental payment data from 96,000 apartments by LeaseLock, a lease insurance provider, found that slightly more people paid their rent on April 1 than had paid on March 1. But another company, Avail, which runs a rent collection platform for landlords, found in its 20,000-apartment sample that the number of tenants delinquent on their rent in April was twice as high as normal.

While the $2.2 trillion federal stimulus package includes funding to help small businesses, it could be some time before business owners see any help. The U.S. had about 30 million small businesses as of 2018, according to the Chamber of Commerce, and accounted for about half of U.S. employment, according to the Small Business Administration.

Some small businesses may not be paying rent because they simply don’t have the cash on hand. In a 2018 survey conducted by software and business-services provider Womply, 21% of small businesses said they would fail after a month without any cash flow. An additional 34% said they couldn’t last more than one to three months.

Jason Wester, who runs a print shop with his father in Marquette, Michigan, estimates the family printing company has only enough money to keep payroll going for one more week. As for the company’s April rent, they haven’t paid it.

“It’s slowed down to a trickle,” he said. He has yet to see his application for an  emergency loan through the Small Business Administration  get approved.

“Right now we’re kind of banking on the SBA disaster loan and hoping for the $10,000 advance to get cash flow,” Mr. Wester said. He called the SBA on Thursday to check on his loan request, but was told that it wasn’t possible to get an update on the status.

For small businesses with enough cash on hand to make the rent now, it is the future that is more concerning.

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“The thing I worry about is June, July and August,” said Craig Barfield, owner of an art framing store in Smyrna, Georgia. “A lot of people won’t have the money to spend on something like what we offer.”

Some local governments have declared moratoriums on the eviction of commercial tenants during the coronavirus outbreak, including in San Francisco, Los Angeles and the states of Oregon and New York.

The strain on small businesses is also putting direct strain on some owners’ personal finances, the Alignable survey showed: 20% of small-business owners report not having paid their home rent or mortgage this month.

Alignable is a Boston-based company that provides a free social network that small businesses use to get referrals and bring in more customers. The poll was conducted nationwide for The Wall Street Journal.

Write to Will Parker at  [email protected]