More small business owners are struggling to pay their monthly rent on time as high inflation has eaten into expected holiday-season earnings, according to a new poll.
Business tracker Alignable found in a monthly poll of 4,789 small and medium-sized businesses that 37%, including 43% of retailers, were delinquent on their rent payments in October. That’s up from 30% in September and the highest month-over-month increase this year.
Chuck Casto, Alignable’s head of research, says inflationary pressures and an uptick in online deal-hunting are wiping out the fourth-quarter profits small businesses typically need to survive bad years.
“Something is really wrong here and much of that is consumers are spending less with small businesses when they should be spending more for the good of their own towns and their tax base,” Mr. Casto said. “Who wants to live near a Main Street that looks like a ghost town?”
Several inflationary factors are driving the spike in rent delinquencies, according to the Boston-based network of 7 million small businesses, which conducted the poll Oct. 15-27.
Among businesses surveyed, 51% cited rent increases of at least 10% and 59% noted a slowdown in consumer spending last month to explain their struggles.
Respondents also mentioned recession fears, high gas prices, rising supply and labor costs — and the cumulative impact of high inflation on more than a year of inflation-driven sales gains.
Only 24% of small businesses that were open before COVID are earning the same monthly revenues they had before the pandemic, Mr. Casto said, down 19 percentage points from 43% last December.
The poll comes as small businesses have raised prices over the past year to offset skyrocketing rent, inventory, energy and labor costs. Experts say the sticker shock has pushed customers with less disposable income to seek better deals online and from larger businesses.
“The inflation pressures are significant and that includes rent,” said Holly Wade, a researcher at the National Federation of Independent Business. “For those who rent space and can’t renegotiate their terms, it’s becoming increasingly difficult to manage higher prices.”
On Tuesday, the nonprofit association reported that its Small Business Optimism Index declined 0.8 points in October to 91.3, marking its 10th straight month below the 49-year average of 98.
The index found that 33% of small business owners described inflation as their biggest challenge to staying open last month, up from 30% in September.
Small businesses are a key gauge for the overall health of the national economy since they employ 46.4% of all private workers, according to the U.S. Small Business Administration’s Office of Advocacy.
The Alignable poll found that automobile businesses struggled the most to cover their full rent last month, with 49% reporting delinquent payments. A supply chain shortage of car parts has raised prices at repair shops and dealerships beyond what many customers will spend, it noted.
Large shares of restaurants and realtors have also struggled to make rent payments as rising food costs and mortgage rates chill their markets.
The poll found that 49% of restaurants could not make rent last month, up from 36% in September. And 37% of real estate agents could not pay, up from 27% last month.
Z Burger restaurant owner Peter Tabibian says he has struggled to cover recent 3-4% rent increases at his four locations in Washington, D.C., and Maryland, even though he recently raised prices.
On Tuesday, the Iranian immigrant said one of his suppliers raised the cost of pickles by $14 a case, compounding other soaring labor and food costs.
“I can’t sleep at night,” said Mr. Tabibian, who applied for a Paycheck Protection Program loan during the pandemic. “My landlords are deferring payments for now, but they all want their money one way or the other.”