Inflation Clobbers Small Business Owners, Driving Up Debt Amid Rising Rent Costs

Record-high inflation is having a traumatic impact on the U.S. economy and small business owners, with two new surveys charting the depth and scope of how the unwelcome new normal has disrupted operations.

Deeper In Debt: Business owners are pouring their personal finances into their operations in order to keep them functioning, according to a new study released by Business.org. Here's a breakdown:

• 89% of business owners have personal debt related to their business ranging from $5,000 to more than $100,000
• 30% of respondents are not saving for retirement so that they can personally fund their business.
• Only 30% of business owners are able to qualify for a small business loan
• 43% of owners lamented that they have an insufficient score to secure funding
• 38% reported their personal credit score has gone down since starting a business.
• And the situation isn’t showing signs of abating as 31% of respondents said they were unsure how to keep business and personal finances separate.

“Small-business owners have no shortage of determination when it comes to starting their own businesses,” said Andrew Mosteller, merchant services staff writer at Business.org and author of the study, which polled 600 small business owners. “This, unfortunately, leads many to leverage their personal finances – putting themselves and their property at great risk.”

See Also: Inflation Angst Causes Dramatic Shift In Spending And Savings Habits

Making The Rent: Another study has determined that a growing number of small business owners are struggling to pay their companies’ rent.

According to Alignable's June Rent Report, which polled 4,382 small business owners:

• 48% of respondents say their rent has increased
• 32% say it's over 10% higher
• 14% state rent is now 20% more than it was six months ago.
• 35% of respondents admit they could not pay their June rent in full and on time, up 2% from May and up 9% from January.

June marked the highest rate of rent delinquency among small businesses this year, and the states with the highest rent delinquency rates were Illinois (44%), Texas (44%) and New Jersey (39%).

Ironically, the survey found 36% of mortgage lenders were unable to pay their June rent – in May, only 7% of this professional sector reported rent issues. Other industries that had higher rent delinquency rates in June included construction (35%, up from 34% in May), automotive (35% up from 30%) and manufacturing (35% up from 24%).

Still, there was some glimmer of good news as rent delinquency decreased month-over-month for restaurants (38% down from 41%), retailers (35% down from 40%), salons (25% down from 40%), and the travel/lodging sector (24% down from 36%).

“Looking at rent delinquency rates for various industries, the most alarming statistic of this entire study emerged among companies in the transportation sector, largely because of the cumulative effects of higher gas prices over the past few months,” said Chuck Casto, head of content marketing at Alignable. “In May, most of the taxi and limo services, Uber and Lyft drivers, and trucking companies were getting by, with just 22% saying they couldn’t pay their rent.

But now, a month later, that number has skyrocketed 41% to 63% of SMBs in the transportation industry reporting that they couldn’t afford their rent, as gas prices are too overwhelming for them.”

Photo: Arek Socha / Pixabay

See Also: Housing Beat: Mortgage Rates Creep Down, Inventory Expands And Who Wants A Vacation Home Anymore?