Small Businesses Can’t Pay the Rent

Inflation is painful. We’re reminded of it every time we go to the grocery store and the gas pump and when the utility bill comes. There’s a whole generation or two that’s never been through anything like this. And because it affects us on a personal level, it’s easy to forget that businesses are affected too, especially small businesses.

According to the Small Business Administration, there are 32.5 million small businesses in the United States which account for 99.9% of all U.S. businesses. A new study by the Boston-based business tracker, Alignable, says 37% of U.S. small businesses couldn’t pay their rent in October 2022, up 7% from September 2022.

Chuck Casto, the author of the study, wrote that small business owners’ incomes are “basically being eaten away by inflationary pressures.” The study found:

  • Half of the businesses surveyed said their rent was 10% higher than it was six months ago.
  • 20% of businesses said their rents have increased 20% since April 2022.
  • 51% said they had some sort of rent increase in October 2022.

That’s the what. Here’s the why. Just like individuals, the small business owners who can’t pay the rent say they don’t have the money because of higher rents, the impact of a year of high inflation, steeper-than-usual gas prices, increases in supply chain costs, rising labor expenses and shortages, and reduced consumer spending because people are afraid of an imminent recession.

In the U.S., most states’ rent delinquency rates were way up compared to September. There were a couple where rents actually declined. The chart below tracks rent levels since December 2021. Only two had decreases in rent levels.

Courtesy Alignable

While inflation is down slightly from its 40-year high of 9.1% in June to 8.2% in September, it is still a force businesses must reckon with. Alignable found that one-third of small businesses say they’re at risk of closing if revenue doesn’t “ramp up” in the coming months.

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