Small businesses in the U.S. are struggling under the weight of rising costs and slowed revenue growth, according to the latest data in a research report from Alignable, a small business network. The report, based on a survey of more than 4,000 small business owners, found that rent delinquency reached a new three-year high in May, with nearly half (46 percent) of those polled saying they are unable to pay rent in full and on time
This is a significant increase from the 43 percent polled in April and the highest delinquency rate since March 2021. The report paints a bleak picture for America’s small businesses, the backbone of the economy.
The research revealed that 58 percent of small businesses polled reported rent increases in the past six months, which is up from 54 percent in April. Additionally, 70 percent of businesses polled said they are paying higher wages than last year due to a tight labor market.
They are also facing declines in revenue. The pre-pandemic boom seems like a distant memory for many as 71 percent of businesses established before COVID-19 are earning less than before the pandemic, with nearly half (46 percent) making only half or less of their previous monthly income. Newer businesses are faring no better, with 72 percent of respondents reporting a decline in revenue compared to last year.
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There’s also inflationary pressures. Researchers at the company found that cumulative inflation is the top concern for a third (33 percent) of small business owners polled while 89 percent of businesses report higher supply costs than last year — further squeezing profit margins.
The research showed that rising interest rates are adding to the financial strain of small businesses. More than half (52 percent) of businesses polled say the current rate is negatively impacting their business, and nearly half (46 percent) believe a significant rate cut by the Federal Reserve is necessary for recovery. This economic environment is also leading to a rise in credit card debt, with 47 percent of respondents reporting an increase.
There are cash flow concerns as well. The financial future looks uncertain for many businesses as 39 percent of respondents reported having only one month or less of cash reserves, a five-percentage-point jump from April.
The researchers found that the struggles are not evenly distributed across the country. States such as New York, Texas and Virginia saw particularly high rent delinquency rates, exceeding 50 percent. Industries such as travel and lodging, science and technology, and transportation were especially hard hit, with half of businesses in these sectors unable to pay May rent.
With small businesses facing such significant financial challenges, their ability to contribute to economic growth and job creation is seemingly under threat.