High Rents Create New Challenges for Small Businesses

Inflation might be cooling off (it currently sits at 2.9 percent, the lowest its been since March of 2021), but prices for goods are still 20.9 percent higher than in February 2020 when the pandemic took its hold on the world. This has consumers continuing to feel the pinch, and small businesses are also facing similar challenges: Rent, for instance, is still stubbornly high and only getting higher for some owners.

When rent goes up, businesses have few options: They can raise prices on their customers, who are already struggling with the high cost of goods; they can skip payments and fall behind on their rent; or they can move somewhere rent is cheaper. None of these are great choices to have to make. And according to data from Bank of America, “rent payments per small business client increased 11 percent year-over-year (YoY) in July, twice as high as rent of shelter inflation reported in the Consumer Price Index (CPI) report.” (Renting or owning a residence is known as “shelter”).

Things aren’t nearly as bad as they were during the pandemic, to be sure. However, data from a survey by Alignableshows that of the 6,000 small business owners who participated, 41 percent couldn’t pay their rent on time and in-full during July. Fifty-two percent had experienced rent hikes in the last 6 months.

Are there other options small businesses can look to in an effort to bring in more revenue without passing on the rent burden to customers? Absolutely – when times are tough, you have to get creative. Small businesses could consider ways to offer financing options to their customers, if what they sell is a high-cost item or service. Owners can also consider revamping their marketing tactics to earn new customers, or develop a loyalty program that encourages repeat customers. There’s also the possibility of talking directly to the property owners and negotiating a rent payment plan, lower monthly payments, or request to make late payments. And if the landlord is set to raise rent soon, some business owners have successfully threatened to leave their property should the cost increase.

Remember that the rising costs of just about everything aren’t isolated to small business owners. Landlords also don’t want to lose patrons, and chances are they’ll be amenable to reasonable negotiations between themselves and tenants. Because when small businesses can succeed and thrive, we all benefit.

There will always be challenges when running your own business, but ARF Financial is ready to be your partner through the ups and downs. Like helping you secure funding for a new project or to offset higher labor costs. Our Interest-Only Revolving Line of Credit (IO-Bankroll) offers low, interest-only payments for up to a year, plus approvals in 24 to 48 hours on amounts up to $1 million. The 11-month revolving period gives you the flexibility to draw funds and pay down your principal balance as often as you need. Learn more about Bankroll today, and apply online to get started on your journey to success.

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