According to new survey findings from Alignable, the Boston-based small business referral network with over 7 million members, small business owners’ ability to pay rent on time took a 7 percent dive in just one month, reaching 37 percent of U.S. small business owners in October.
Chuck Casto, head of news and research at Alignable, said this is the largest and most rapid increase in 2022. Moreover, in September, rent delinquency had reached a six-month low, which was coupled with an optimistic outlook for earning potential as many small business owners reported increased sales.
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In its survey of nearly 5,000 small business owners, Alignable revealed reasons for higher rent delinquency coincided with higher rents for 51 percent of SMBs. Additionally, survey respondents cited “the cumulative, negative impact of more than a year of high inflation, which has absorbed most sales gains,” recessionary fears, steeper-than-usual gas prices, ongoing increases in supply chain costs and rising labor expenses and shortages.
At the same time, 59 percent of SMB owners told the company they are experiencing consumers spending less.
Notably, while the findings of the report are discouraging, Casto said the situation is “even more daunting in Canada, where 42 percent of small business owners said they couldn’t make October rent, up 1 percent from September.”
Alignable’s survey found that industries experiencing the highest rates of rent delinquency include educators, car dealers, restaurants and retail. Compared to the national average of 37 percent, 43 percent of small business owners in the retail industry reported rent delinquency, compared to 39 percent within the beauty industry. Education businesses were the highest at 57 percent, followed by automotive and restaurants at 49 percent rent delinquency.
All eyes are on retail right now and those eyes aren’t exactly smiling, especially when it comes to rent delinquency,” said Casto. “Some 43 percent of all retailers say they couldn’t cover their October rent in full this month, up 12 percent from last month. Beyond that, 43 percent is close to the highest rent delinquency they’ve had all year, topped only by July’s figure of 44 percent.”
Two industries that saw slight improvement (just 1 percent better than in September) are gyms, down to 41 percent from 42 percent in September. Similarly, the October rent delinquency rate for musicians and artists was down 37 percent from 38 percent in September.