Rent struggles are spreading across the small business sector. According to the online small business network Alignable, their July Rent Report shows that 45% of independent restaurants didn’t have enough funds to pay rent. Twelve other segments of the small business economy, from transportation and gyms to real estate companies, have also fallen on hard times, unable to afford their rent last month.
Why this is concerning: It’s bad enough that individual renters are struggling to make payments as inflation eats away at their monthly incomes. The tragic thing about small businesses being unable to pay rent is that many of them employ workers who depend on them for their livelihood. To survive, many of these businesses might be forced to cut wages or implement layoffs, both of which will have negative effects across the social and economic spectrum.
What to watch out for: Pay attention to Friday’s Employment Situation report to get an updated picture of the state of the labor market.
It shows that rent struggles are severe for several small business sectors, including transportation (trucking companies & car services), restaurants, retail shops, and beauty salons. What's the cause according to SMBs? Rent hikes, labor costs/the ongoing labor shortage, the high price of gas, and reduced consumer spending are all combining to create economic instability.
Source: Zero Hedge
Restaurants Couldn't Pay Rent In July
Here are some quick highlights:
- The recovery rate for small businesses is at an all-time low of just 25%. That means 75% of small business owners have yet to earn the same monthly revenues they generated prior to COVID.
- 46% of SMBs say they're paying higher rent now than they did six months ago.
- 45% of restaurants (up 7% from June) & 44% of retailers (up 9% from June) couldn't afford their July rent.
- In fact, for restaurants & retailers, their rent delinquency rates in July were the highest they’ve been since the end of 2021.
- 40% of salons couldn’t make rent in July, up 15% from 25% in June.
- 48% of small businesses in transportation didn't have enough cash to pay July's rent.
- The overall rent delinquency rate for U.S. SMBs is 34%, just 1% shy of 2022's highest rate (35% in June).
- The situation is a bit worse in Canada, where the rate is 37%.
- 42% of SMBs in MA, 41% in NY, 40% in IL and 37% in MI weren’t able to fulfill their rent obligations in July.
Originally published on Zero Hedge.