US small businesses face a rent delinquency crisis, with rates soaring to a three-year high in April. According to a recent report from Alignable, an online networking platform for small business owners, a staggering 43% of small businesses could not pay their total rent this month. This alarming figure marks the highest rent delinquency level since March 2021 and highlights the immense economic pressure entrepreneurs are grappling with nationwide.
The steep increase in rent delinquencies is due to soaring rents and declining revenues. In the last six months, more than half of the small businesses in the survey have reported a significant rent increase, with 11% experiencing an increase of at least 20% compared to the previous year.
In addition to the rent pressure, a significant decline in revenue is also affecting businesses set up before the pandemic. Only 32% of these businesses earn as much or more monthly compared to their pre-COVID-19 income.
In April, independent restaurants became the most affected sector, with 52% not paying rent. The turmoil of the big tech companies is also affecting science and technology firms, with 51% facing a debt crisis. Other sectors struggling to meet their rent obligations include beauty salons, fitness centers, musicians, artists, and car services.
The crisis is not evenly distributed across the country. Texas recorded a record-high delinquency rate of 52%, matching its March 2021 pandemic peak. Massachusetts, California, and New York also reported high rates of rent delinquency, while Colorado maintained the nation’s lowest rate at 26%.
With 34% of business owners reporting only a month or less of cash reserves, the need for targeted financial assistance and policy measures has never been more urgent. As inflation remains a top concern and interest rates continue to limit financial flexibility, small businesses are calling for support to navigate these challenging times.
For the overall economic recovery and prosperity, the resilience and survival of small enterprises is crucial. As the backbone of the economy, their ability to survive the current challenges will determine the trajectory of the post-pandemic landscape.
