Newsletter: Inside small businesses’ struggle to pay rent: Here are 4 stories

Good morning. I’m Rachel Schnalzer, the L.A. Times Business section’s audience engagement editor, back with our weekly newsletter. This week, let’s start delving into the pandemic’s effects on small businesses — a topic my colleagues and I will continue to track in the weeks and months ahead.

If you’re a member of the small-business community, please let us know what you’re wrestling with, what questions you have and what hard choices you’ve made, as well as any successes adapting to the COVID-19 era or victories made possible by the changes the pandemic has wrought.

Today we’re going to look at rent.

Eviction moratoriums are giving some breathing room to many small companies, enabling them to stop paying rent without immediately losing their places of business — or giving them leverage to negotiate deferred-payment deals with their landlords.

But such arrangements just buy time: Business owners remain acutely aware that they’re racking up debt. If their companies survive, eventually they’ll face extra-large monthly bills covering not only the regular rent but also a chunk of the back rent.

In some cases, business owners have signed personal guarantees promising that if their company can’t pay its debts, creditors can take their homes, savings and other personal assets.

We spoke with four small-business owners to learn about their experience handling rent during the pandemic. Here are their stories.

Scum and Villainy Cantina

Self-described as “your friendly neighborhood geek bar,” this Hollywood spot is $147,000 behind on its rent.

Aside from a short-lived reopening, it has been closed since mid-March. “We’ve tried to negotiate with our landlords, with no luck,” co-owner J.C. Reifenberg says. “So we have not paid rent since the shutdown at all.”

The bar and restaurant considered offering outdoor dining the way other establishments have, but it didn’t work, Reifenberg says: There isn’t much space for tables outside the Hollywood Boulevard location, which is on the Walk of Fame, and people milling around would get too close for comfort.

He doesn’t have a concrete plan for how to turn the situation around, and he’s scared about how much he could lose. Reifenberg explains that he and other Scum and Villainy owners signed personal guarantees while agreeing to their lease.

“My fiancée and I have a baby due in [a few] weeks and are currently on the hook along with one other business partner for all past-due rent, plus we have an additional five years left on the lease,” he says. “Our concern is that in addition to losing our business and our income, we will be sued using the personal guarantees signed, and have our personal savings and possibly homes pursued in an expensive court case.”

Maria’s Italian Kitchen

Before the pandemic slammed Southern California, Madelyn Alfano operated 10 Maria’s Italian Kitchen restaurants. Now the chain is down to eight locations. “It’s been a challenge,” she says.

Alfano has tried to negotiate rents with her landlords while keeping their needs in mind as well.

“I’m trying to be as creative as possible to help the landlords stay in business too.

“Some [landlords] are being really great and allowing me to pay just 50% rent, but they’re not abating the rents. They’re deferring the rents,” she explains. “Now you have to kick the can down the road. Where’s that money gonna come from? You can’t make up that additional 50% plus 100%. It’s untenable for so many small businesses.”

Alfano’s negotiations paid off particularly at her Pasadena location. She says her landlord agreed to abate her April, May and June rent and gave permission to set up outdoor seating in the parking lot, an option Alfano is exploring.

She encourages other small businesses to be transparent with their landlords and suppliers about their difficulties. “Some are more amenable and understanding,” she says. “And some are not … but you’ve got to try.”

Cruel N Revolve Clothing Co.

Cruel N Revolve Clothing’s storefront was open for only about a month before the pandemic forced it to shut.

Co-owner Christian Trujillo, who works as a diesel mechanic and has been infusing money into the apparel company, says he was able to pay the Santa Fe Springs store’s rent relatively comfortably for the first few months. Finances became tighter after his business partner lost his job, but Trujillo says he was able to afford rent by using money he had set aside as a cushion for the business.

The landlord did not agree to reduce the store’s rent but hasn’t been strict about the payment schedule, Trujillo says.

“The landlord was pretty good about it.... If we were late, maybe a week or two, he worked around with us,” he says.

Since reopening the store in June, Trujillo says, it has been “a little easier” to afford rent payments. Cruel N Revolve continues to sell its apparel online and in a few other stores that stock the brand. Trujillo plans to carry on this way for a few months and then reassess.

“We’ve been in the whole industry for a good couple of years, but it was our first time opening up our own flagship,” he says. “We’re trying to hold on tight.”

Centerstage Boutique

After opening 13 years ago in Inglewood, Centerstage Boutique has transitioned to selling online only.

Owner Mattie Chisholm tried a curbside pickup option, with customers placing orders online. “People were nervous and scared. They didn’t want to come out,” she said. Online customers began asking her to ship their orders.

She eventually decided to work from home.

“There was no need for me to go sit at the boutique,” she said, and owing months of back rent would have been too stressful: “I don’t want to have to have it over my head.”

The landlord let her out of the lease pretty easily, she said.

Though Chisholm has not been granted any of the aid for which she has applied, she hopes to find funding that will enable her to reopen her storefront.

“It’s just a matter of getting the funds to get the space,” she says. Many customers “like to come in and try their clothes on.... We want to be able to service them.”

Other stories you may find helpful

◆ Does expanding rent control make sense in a COVID-19 recession? Andrew Khouri explains what you should know about Proposition 21 before casting your ballot.

◆ Proposition 24 is meant to give people more rights over how their data are used. But why is it opposed by the ACLU and the Consumer Federation of California? Sam Dean breaks down the complicated measure.

◆ Calling an Uber or Lyft will probably look different in California after Nov. 3. Suhauna Hussain explains what Prop. 22’s defeat would mean for ride-hailing companies as well as for drivers.

◆ Can Proposition 16 boost California’s Latino-, Black-, Asian- and women-owned companies? Margot Roosevelt outlines the state’s recent history with affirmative action, as well as the potential effects of the measure on businesses.

◆ Are you an older parent approaching retirement? Certified financial planner Liz Weston explains how to consider the child benefit when determining when you’ll begin claiming Social Security benefits.

◆ The CARES Act kept millions of Americans out of pandemic-driven poverty — but that’s over, columnist Michael Hiltzik writes. “Since May ... as many as 7.9 million Americans have drifted back under the poverty line.”

◆ As jobs vanished during the pandemic, immigrants left California. The question is how many, says Laurence Darmiento. He describes the harsh realities facing California’s immigrants.

◆ “Even after offering policyholders cuts in premiums and co-pays, the nation’s largest commercial health insurer still raked in over $1 billion a month,” columnist David Lazarus writes. He asks: How much profit is enough when it comes to health insurance?

◆ To decrease their carbon footprint, airlines could turn to hydrogen fuel. Samantha Masunaga explains how that might work.

One more thing

Could your car keep you safe from COVID-19? Some high-end vehicles offer advanced air filtration systems, Daniel Miller and Russ Mitchell report. But whether these features can protect against the coronavirus is questionable.

Have a question about work, business or finances during the COVID-19 pandemic, or tips for coping that you’d like to share? Send us an email at [email protected], and we may include it in a future newsletter.