BOSTON–The economy may be improving, but credit union leaders may want to pay attention to members who are small business owners, as the number of small businesses that can’t pay their rent actually increased in May over April.
According to Alignable’s May Rent Report 37% of small businesses still can’t pay their rent, marking a “recovery reversal,” as the number is up from the 31% in April who reported a similar struggle.
The reasons are many for this backslide, according to the 7,774 small business owners who participated in Alignable’s May Rent Survey, the company reported. However, most of the issues are related to inflationary pressures and hiring shortages.
Key Findings
Among the key findings in the most recent research:
- Nearly half (49%) of restaurants reported they couldn’t cover May rent, compared to just 35% in April—disappointing news for an industry that looked like it was making early strides toward recovery last month.
- 45% of SMBs in construction and transportation also had trouble paying May rent, due to inflation. Prior to skyrocketing prices of gas and lumber, most small businesses in those industries were able to pay their rent in full, even during the COVID Era, Alignable said.
- Several states experienced more severe rent problems in May, too. Nearly half of the SMBs in Michigan (47%), Georgia (46%), and Virginia (46%) didn’t pay their full rent this month. Tennessee (43%), New York (40%) and Ohio (39%) weren’t far behind.
- 45% of minority-owned businesses couldn’t afford this month’s rent, either. Among women-owned firms, the number was 39% (up from 33%). For more than a year, both of these groups have required more rent relief assistance than they’ve received.
- Before rent issues become markedly better, revenue levels need to improve. According to Alignable’s May Road To Recovery, 58% of SMBs have only reached half or less of the monthly revenue levels they achieved prior to COVID. And that number was only 48% in April.
- Finally, based on another recent study we conducted, 67% of SMBs are worried that inflation will stunt their recovery. “And this rent poll clearly confirms that fear,” Alignable said.