Due to skyrocketing inflation, small businesses in various states have been struggling to pay their rent. A new report shows that rent delinquency hit 40% in October.
Boston-based business tracker Alignable surveyed 4,789 randomly selected small business owners, and more than half reported that their rent had gone up at least 10% in the last six months. Seven months ago, the majority said that their rent had increased by a staggering 20%.
The study also found that around 37% of small businesses were unable to pay their rent in October. The author of the study, Chuck Casto, explained that small business owners are “steadfast”, but that their incomes are “basically being eaten away by inflationary pressures” as prices rise throughout the country.
Alignable stated that around one-third of businesses are at risk of closing if revenue does not increase significantly in the coming months. The problem is consumers are shying away from spending amid fears of the looming recession.
Respondents blame higher rents, the impact of more than a year of high inflation, high gas prices, increases in supply chain costs, rising labor expenses and shortages, and reduced consumer spending for their businesses' failing.
The study also found that of the selected businesses, around 51% saw a rent hike in October, and 59% reported that consumers spent less in October than in previous months. With the continued rise of food and gas prices and inflation the highest it's been in 40 years, sales have been eclipsed, putting pressure on business owners and workers.
In September, the study found that rent delinquency was actually at a six-month low. This low was likely fueled by optimism for the final quarter of the year's earning potential as businesses reported increased sales.
However, just a short month later, 40% of small business owners found themselves unable to afford their rent in full or on time, compared to 30% in September.
Businesses in the education sector saw rent delinquency hike up 13% from September to a shocking 57%-the highest ever seen in that subsect of businesses. The automotive and restaurant industries were close behind.
Around 49% of restaurants were unable to pay their rent in October, while the same percentage of car dealership and repair shop owners defaulted on rent as well. The owners explained that they are still struggling with supply chain issues ranging from costly metals and electronics to scarcity of inventory for products and parts their customers need to have their vehicles fixed.
Furthermore, 37% of real estate agents admitted to their firms that they were unable to pay their rent in October, up 27% from September. The fallout from a slowdown in home sales compounded with rising interest rates has put a strain on the real estate industry.
Small retailers also failed to cover their October rent, with 43% admitting they did not pay. The rideshare industry was affected as well. Respondents employed by companies like Uber said that reduced customer spending and higher gas prices are the reason they were unable to pay their rent.
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This article was produced and syndicated by Wealth of Geeks.