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Struggling retailers may require lease or loan restructuring

It goes without saying that some small business owners may have struggled to remain in the black after the economic downturn in late 2007. Unfortunately, vendor contracts and commercial lease payment obligations may not be able to accommodate cash flow issues. As a result, some business professionals may have consulted a real estate attorney about their commercial loan issues.

According to a recent article, even large businesses may have had to revisit their lease agreements. Called the Amazon Effect, the term refers to an increase in large-scale retail stores in Massachusetts and nationwide. Slumping sales, pressure from discount outlets and online retailers, and other factors are believed to account for the closures. E-commerce, in particular, is presenting fierce competition to retail stores. Such online sales grew 10 percent in 2013, accounting for over 96 billion dollars. In 2014, online sales are expected to top $1 trillion.

The scale of the closures may surprise readers. For example, RadioShack recently announced that it planned to close 1,100 stores in the coming months. Staples made a similar announcement, with plans to close 225 locations across the country in the months ahead. According to one source, the closures may save Staples an estimated $500 million. Since 2010, Sears has closed 300 stores.

When a business if facing financial issues, a consultation with a commercial real estate attorney may provide new options, or lend clarity to existing choices. Rather than forcing a business into bankruptcy, a leaseholder or creditor may be open to alternative arrangements. An attorney may be able to provide assistance in lease negotiation or even the restructuring of an existing commercial loan.

Source: The News Funnel, “A Rough Time for Retail,” March 20, 2014

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