The Least Lease
The flip side to the economic downturn is that commercial real estate is suddenly very affordable, says John Robbins, principal at San Ramon, California-based Kabler/Robbins Commercial Real Estate, who notes that prices have plummeted as much as 50 percent in the last year in some markets.
Even if you're locked into pricey office space, there's hope, says Alan Whitson, corporate facilities consultant and CEO of Newport Beach, California-based B. Alan Whitson Co. In a down market, it's never too early to open negotiations. "If you're in year three on a five-year lease, you can negotiate to extend for another five-year term at a lower rate," Whitson says. "Landlords are pretty smart--they know 70 percent of something is better than 100 percent of nothing, and they're looking for a stable income stream."
To win a better deal, come to the bargaining table prepared. "Know the market rates and what perks you can push for," says Whitson. "With negotiating, you don't get what you deserve; you get what you negotiate."
More Than Friends
When capital is hard to come by, entrepreneurs often have better luck raising cash close to home. But hitting up friends and family can backfire. "The same issues you have with any investor get compounded when you're borrowing from someone you'll be seeing at the dinner table every night," notes Herb Kozlov, a corporate finance attorney with New York City-based Parker Duryee Rosoff & Haft. "In the end, you may trash an important personal relationship."
Formalizing the transaction can help guard against friction down the road. "You want to be clear," says Kozlov, who advises creating an explicit loan agreement. "For example, is it a loan to the company or a loan to you personally that you are obligated to pay whether or not the business works?"
Boston-based Circle Lending offers an economical online service enabling would-be borrowers to create and administer loans with family and friends. "We charge a one-time start-up fee of $49 and 3 percent of each loan installment," explains Jill Miller, "and then we basically take care of the transaction." In addition to documenting loan agreements, Circle Lending enables borrowers and lenders to track and manage their transactions online, offers direct debit and deposit services, and sends e-mail reminders to borrowers when payments are due. Beats hearing it from your mother.