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NEW YORK (TheStreet) -- With every economic cycle comes bankruptcies at chain stores, often because of aggressive overexpansion in an upcycle. Last month it was Borders Group (BGP) breaking the news that roughly 30% of its stores in the U.S. and Puerto Rico would close by May amid diminished consumer spending, a tough economy and more consumers embracing e-readers.

The closing of doors has positive and negative reverberations for nearby small businesses.

Borders says it's closing roughly 30% of its bookstores in the U.S. and Puerto Rico by May.

On the one hand, small businesses may be able to pick up fixtures, shelving and other equipment on the cheap from liquidation firms. A small bookstore -- those that are left -- and related businesses may also be able to buy stock wholesale. Borders is liquidating more than $350 million worth of inventory, including books, magazines, music, movies calendars, and posters.

"A downturn like the one that we're coming out of is a really great time to be running a small company," says Alice Bredin, owner of

Bredin Business Information

, a marketing consultant to large firms targeting the small to midsize business owner.

"The opportunity to find affordable office space or retail space, to pick up furniture from these companies ... either from suppliers who are offering a good deal or secondhand, is phenomenal," says Bredin, also a small-business adviser to American Express OPEN, a card platform for small-firm owners. "You can save so much, and when you're running a small company those savings make a huge difference."

Large companies typically work with liquidators to get rid of inventory. Borders is working with Hilco Merchant Resources, SB Capital Group, Tiger Capital Group and Gordon Brothers Group.

Borders Store Closure Map

Other experts, though, say the

closing of a big chain branch such as Borders

has negative consequences for small businesses surrounding it and doing business with it.

"When a big potential customer like that goes away or reduces its business significantly, there is a ripple effect on all the people who sell their stuff through those kinds of retailers," says Eric Nelson, a New York-based attorney with small businesses as clients.

"It may not be as direct an impact, but if you're running a small to midsize company and you've got a big fish customer, you may be hurt by something like this," he says. "Borders will take a hard look at what they're buying and cut back the number of things they sell."

Borders is closing roughly 200 stores because it can't afford the generally large spaces for the number of customers coming through the doors.

If the store goes so-called dark, or bankrupt, the bigger the new tenant, the better concessions they will get. Smaller businesses are less likely to be able to bid on the whole space, and, says Gary Master, a tax partner who is a part of EisnerAmper's real estate and construction group, "It becomes costly to break it up into a smaller space."

"There is a whole lot that goes on from the real estate side when a major tenant pulls out," Master says. "It's not as if there is a tremendous handful of larger tenants."

Moving out to suburbia, landlords look for large department and chain stores such as Borders to "anchor" shopping malls and strip malls.

"If the landlord can't re-rent that space to a tenant of equal size pretty quickly, the smaller businesses that depend on that business to drive consumer traffic will have a harder time maintaining their foot traffic, their sales volume and their ability to stay in that location as well," Nelson says.

Some small retailers may be able to enforce so-called kickout rights, Master says, which is a clause sometimes put into lease agreements that allows the retailer to get out of its lease if a large anchor tenant leaves.

While every store closing may be different, for large store closings, Bredin suggests small-business owners call the parent company to begin inquiries or go to the store itself.

Be prepared to go back several times.

"Roll up your sleeves and get in there," she says.

An email to Hilco was not returned. Calls to the other liquidators were not returned.

-- Written by Laurie Kulikowski in New York.

To contact the writer of this article, click here:

Laurie Kulikowski


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