Once I talked to a fried chicken fast food owner who rented a retail space from a friend of mine. The location is in a bad part of town and they did not pay rent for 2 months. My client gave them notice of default. When I got to the restaurant, I found the tenants or the business proprietors to be a nice and respectful couple. I saw their two daughters doing homework at the restaurant. They seemed to have a decent business. I brought lunch from them and found the food very good.
It puzzled me that they could not pay rent. I learned that they had a few surprises one after another. First their main fryer broke down and they had to wait for a loan against their vehicle to be approved to repair the fryer. In the 10 days when they could only use one fryer, they could not meet the lunch and dinner rush demand. Shortly after the fryer was repaired, there was 4 days of an ice storm which business had to close. After the 4 days of ice thawing, the roof caved in. The landlord’s insurance covered their equipment loss. Unfortunately, by then they had already let their insurance coverage lapse, which would have covered their income loss from acts of god. That’s an example of small business owner not having savings to absorb surprises.