Many small businesses are having trouble paying rent – and customers aren’t returning fast enough.
More than half of minority-owned small businesses and more than a third of small businesses overall said they had trouble paying rent in June — and customers are not flocking back fast enough as Covid-19 ebbs.
The findings come from a survey by small-business network Alignable, which recently polled 3,814 businesses about their rent status. About 53% of minority business owners said they had trouble paying rent in June, up 8 percentage points from May and disproportionately higher than the 37% of small-business owners overall who reported having trouble paying rent.
“The one word answer is access. Greater access leads to greater outcomes, whether it’s access to financial resources, business services, suppliers or other business owners with whom one can network, and minority-owned businesses have never been working on a level playing field,” said Alignable CEO and Co-founder Eric Groves in an email.
He pointed to reports that minority-owned business owners also had trouble accessing the popular Paycheck Protection Program, being rejected at a rate of almost two times that of non-minority businesses.
“It shouldn’t be surprising after over a year of intense financial impact on business owners, that those who had difficulty accessing the financial lifeline provided to get businesses through the crisis would be in a worse financial position exiting the crisis,” Groves said.
The rent challenges could have big implications for the commercial real estate sector, which is adapting to a new normal in the office and retail sectors.
Several states saw an increase in small businesses reporting rent challenges, including New York, Virginia, Arizona, North Carolina and Florida.
The industries with the biggest difficulties paying June rent include construction, transportation, travel, beauty and entertainment, with 40% or more businesses having trouble in those industries.
“We’re optimistic we will see more growth there as we get deeper into the summer. But clearly the climb back will be harder and more challenging for minority-owned businesses who found less support resources over the past year,” Groves said.
Overall, the rent troubles stem in part from a lack of customers and rising supply costs, which 55% of small-business owners say have hit their bottom line. Meanwhile, about 48% of small-business owners say they have half or fewer customers than they had before the pandemic, and 57% report having half or less the monthly revenue they had before Covid-19.
“The data from our June Road to Recovery Report showed while businesses in the U.S. have reopened dramatically over the past few months, they are not yet seeing the increase in customers and revenues needed to really start recovering,” Groves said.
About 55% of small-business owners are finding it more difficult to hire workers than before the pandemic, with 34% saying it was “significantly” more difficult, according to a separate survey of small-business owners by Alignable. About 46% of small-business owners said employee costs have risen, with 24% saying they have risen by at least 11%, with 7% saying they have risen more than 25% percent.
That worker shortage has led some small-business owners to offer higher pay and big bonuses not normally seen outside December, according to a recent report by payroll provider Gusto. And even higher pay isn’t working in some cases, as many workers seem uninterested in returning to the type of work they had before the pandemic.
And many workers no longer want to head to an office to get the job done. The average worker, according to one study, is willing to take a small pay cut to continue working from home two or three days a week after the pandemic ends. Employees at some of the biggest tech companies are also willing to take a pay cut in order to relocate to a cheaper part of the country — and by a wide margin