Small Businesses in Crisis As Rising Numbers Unable To Pay Rent

A significant number of small businesses across the nation are struggling to pay rent due to skyrocketing costs, a recent study by business networking platform Alignable found.

The company's latest Small Business Rent report, published on Friday, found that 43 percent of small business renters in the U.S. were unable to pay their rent in full and on time in the month of April. Such a high delinquency rate hasn't been reported in the U.S. since March 2021, at the height of the COVID-19 pandemic, when it reached 49 percent.

The delinquency rate was also four percentage points higher than in March, making it the largest month-over-month surge in over a year, according to data analyzed by Alignable. Newsweek contacted Alignable for comment by email on Tuesday morning.

The state with the highest delinquency rate in the country was Texas with 52 percent of small business owners unable to pay their rent in full and on time in April, followed by Massachusetts (47 percent), California (46 percent), Maryland (42 percent), New York and Washington State (39 percent). The lowest delinquency rate was in Colorado, with 26 percent.

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Restaurant owners were struggling the most, with 52 percent of them saying they couldn't pay rent in April. Small business owners in the science and technology sector followed with 51 percent, while 49 percent of owners of beauty salons and 48 percent of gyms owners couldn't pay rent this month.

The report shows that small businesses in the U.S. are struggling despite the resilience of the U.S. economy, which avoided a widely expected recession last year due to the strength of its labor market. Troubles among small businesses is trouble for the entire country's economy, as small businesses employ nearly half of the entire American workforce, according to the U.S. Chamber of Commerce, and represents 43.5 percent of American GDP.

It could also mean trouble for Joe Biden as he runs for re-election in November, who on Monday released new data boasting about the support his administration has given to small businesses since 2020. According to the 2024 Small Business Boom Report, the Small Business Administration (SBA) has nearly doubled small dollar loans.

In a press release from the White House, the efforts of the Biden administration to support small businesses are pitted against House Republicans' attempts to cut government-wide spending and undermine support for small businesses. Newsweek contacted the White House for comment by email on Tuesday morning.

Alignable described its findings as "very worrisome," citing the opinion of small business owners who told it what came after the pandemic—higher rents, surging inflation and lower revenues—was worse than the health emergency itself, with its mask mandates and forced closures.

A majority of 54 percent of small business owners surveyed by Alignable said that their landlords were charging them more now than six months ago, with 11 percent saying their rent has increased by over 20 percent.

According to Alignable, only 32 percent of small businesses founded before March 2020 are now earning as much every month as they were before the pandemic. Its data is based on poll responses from 4,171 randomly selected small business owners surveyed between April 1 and April 24 and previous data collected by the company in the last three years.

This chart, provided by Statista, shows the number of employees in retail trade in the U.S. in 2021, by employment size of establishment.

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Among the other challenges mentioned by small business owners are the rising cost of gas, which started climbing as spring approached, surging supply costs, still high interest rates and the difficulty trying to attract and keep personnel.