Inflation has been a preoccupation for small businesses for some time, as the costs of raw materials, labour, energy, and transportation have all but vanished. Rents and landlords – who feel more aggressive as the nation grows out of the height of the Covid pandemic – have increased to the inflationary effect being felt on Main Street. Although there are signs of easing inflation in the US economy, this is due to the fact that the Federal Reserve is deliberately reducing demand.
They can’t pay the rent
Where does all this come from? According to a new national survey of small business owners conducted by Alignable, the percentage of small business owners who failed to pay their full rent that month rose sharply in August.
According to inflation indicators, housing rents are hardest hit by the crisis, but Alignable’s data shows that it is the small business rent inflation crisis that is actually getting worse. Forty percent of small businesses said they could not pay their rent in full this month, up 6 percent month-on-month – a record high since 2022.
“I have been following the process every month since March 2020 and I am amazed,” said Chuck Casto, Head of Research and Communications at Alignable. The percentage of small businesses that can’t rent hasn’t been this high since March 2021. “That’s the number we were expecting in the middle of the pandemic, when a third of places closed, and everyone was wearing masks or not going to restaurants,” Casto said.
The CEO went on to say that inflation is a much bigger concern in Main Street than Covid, but that until it eases significantly, small business costs will cause another existential crisis for Americans.
Small Business Owners Surveyed by Alignable
- 45 per cent say they pay at least 50 per cent more rent than they did before Covid;
- 24 percent said landlords had doubled their rent.
- 12 percentage He says he pays three times more now.
The sector was not even overcome by Covid
Research data also shows that many small businesses are still struggling to return to pre-Covid revenue levels. Casto said Alignable is hoping to see numbers trend downward among small business owners who say they are not back to pre-Covid sales numbers, but that hasn’t happened yet.
Last December, when many small businesses were still in critical condition in the middle of the holiday season, 43 percent said they were “completely back,” according to the research. “It’s only 23 percent now,” Casto said.
The sentiment in Alignable’s data reflects a recent CNBC survey that found small business confidence at an all-time low. According to Casto, rental data is really crucial because it gives a complete picture of what’s going on in the finances of small businesses.
Alignable asked small businesses if inflationary pressures, including rising rents, could put them at risk of staying open over the next six months, and while that number was unchanged in August, it remains uncomfortably high at around 47-48. percentage – 20 of this percentage“Very concerned.” And let’s definitely add that this number is “only” 28 in the spring percentage volts.
Has the recession started?
Expectations of lower sales have been the biggest contributor to the quarterly drop in confidence, and many small business owners believe the recession has already begun, according to a CNBC Small Business Survey.
“We are definitely seeing a deterioration in stores in terms of activity and number of customers,” Casto said. In the event that it is not possible to return to pre-Covid sales in the case of the monthly revenue generated, the additional expenditures caused by inflation and a slowing economy are not even taken into account. “It’s a mixture of everything, everything that builds on each other,” he added.
“Many storefronts are already empty, even in trendy neighborhoods,” Casto emphasized. “We’re not at the ghost town level yet, but we’re worried.”
Landlords Don’t Give Up Because of Mortgages
There are options for small businesses facing a rent crunch. Someone is negotiating with landlords, although this becomes increasingly difficult as we move away from the peak of Covid.
“Realtors feel they left prices at the same level for a year and a half and did everything they could to help businesses, but now that they’ve been in trouble for two years, they have to start asking for money,” Casto said. he added: They also have serious mortgages.
Observations from small business owners show that more people are now afraid to ask for more rent forgiveness from landlords after landlords have grown impatient after the past two years. However, the survey also indicates that many landlords still prefer the tenant to make a bona fide effort to pay rent and offset outstanding rent rather than face an empty storefront during the economic downturn.
Can Christmas save the year?
As the Fed seeks a “soft landing” for an economy it says isn’t in a recession, there’s a chance that if inflation continues down the trajectory, it will mean lower costs overall for small businesses. Small businesses have adapted to this in the past few years, many of them somehow surviving the pandemic, rescheduling their fiscal year in terms of budgets, and many of them retiring early. But what will happen in the future can be answered in the last quarter, given that the holiday period is traditionally the strongest in the retail sector each year. Many people expect that When the frenzy of consumption arrives, at Christmas Inflation indicators are already lower, and therefore businesses in crisis can be rescued. However, according to Casteau, if inflation figures continue to rise, and because of this the level of consumption remains low, this could have unforeseen consequences for the retail sector.
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