Alignable: 37% of SMBs Can't Pay May Rent -- Recovery Backslides

TREND TRACKER | DATA INSIGHTS | BOSTON, MA -- May 18, 2021 -- Alignable’s May Rent Report has just been released and shows that 37% of small businesses across the U.S. could not afford to pay their rent in full, on time this month. That represents an increase of six percentage points compared to 31% in April.  Despite COVID cases subsiding and many businesses reopening, small business owners’ rent problems are on the rise this month.

Based on a survey of 7,774 randomly selected small business owners conducted from 4/24/21 to 5/17/21, key factors are contributing to increased rent problems:

• Supply and inventory shortages, which are leading to skyrocketing supply costs and growing inflation
• Widespread labor shortages among businesses that desperately need help, but can’t find it

Beyond those hurdles slowing economic recovery from coast to coast, Alignable’s May Road To Recovery Report showed that 58% of small business owners only have half or less of the monthly revenue they had prior to COVID. (And that figure was only 48% in April). 

Plus, 49% said they’ve had trouble attracting customers, reporting that their monthly customer counts are half or less than what they were prior to the COVID crisis. 

Together, these forces exacerbate small business owners' ability to pay rent.

Rent Issues Remerge Among Restaurants

And while many restaurants have benefited from widespread reopenings, the PPP, and the promise of extra support from the Restaurant Revitalization Fund, now 49% of restaurant owners polled said they can’t cover May rent. That’s up 14% compared to April, when just over one-third (35%) reported rent troubles. 

Unfortunately, restaurant owners find themselves in the middle of the labor shortage issue, so many owners tell us they can’t reach their revenue goals without the proper staff to handle an expected influx of customers. Of course, that affects their ability to pay full rent on time, as well. 

As we reported last week, a poll of 2,227 small business owners shows that 54% blame government handouts for the shortage, adding that many former restaurant or retail workers make as much sitting at home as they would returning to work. 

And for the lucky owners who can find staffers, 51% tell us they’re paying them more than they did during COVID, based on the high demand for labor.

This is sad news for the restaurant industry, which, last month, appeared to be one of the frontrunners in the recovery, slowly rebounding from COVID issues. However, these rent statistics represent a setback for restaurants, many of which spent the last 14 months struggling just to stay afloat.

Inflation Seizes Construction & Transportation Industries

As the chart below indicates, beyond restaurants, two other big industries that face rent challenges now are construction and transportation. In past rent reports, these industries didn’t even warrant a mention, as many SMBs in these categories were able to pay their full rent on time. In fact, they fared relatively well during the COVID Crisis.

But now that inflation has descended upon them, many are in trouble. You can see in the chart above, 45% of the owners of construction companies and 45% of the SMBs running everything from trucking lines to Uber or Lyft services say they couldn’t pay their May rent. 

For the construction industry, that number rose 12% from 33% in April. And for transportation, it jumped 9% from 36% last month. 

And though real estate is not listed on the chart, we should keep our eyes on that sector, too.  This month, 36% of real estate agents polled said they couldn’t pay their rent. That figure was only 26% in April.

Since gas and lumber prices are higher now than they were in April, those costs alone could create barriers to paying the rent for construction companies, real estate offices, truckers, Uber drivers, and many more SMBs.

Old Challenges For Some, New Inflation Issues For Others 

Rounding out other industries that are having the toughest time paying rent this month, 50% of those in entertainment said they couldn’t afford it, as many venues have not fully opened yet and some say rising expenses are forcing consumers to forgo hiring high-quality entertainers. 

Until more theaters open and more people host larger events, this sector will still be quite challenged. In fact, the percentage of entertainers unable to pay rent increased 12 percentage points from April, where it was 38%. 

Nearly half (47%) of event planners continue to struggle, but that industry saw some improvement in May, as 53% of them couldn’t pay April rent.

Meanwhile, photographers jumped from 33% in April to 46% in May. 

And small businesses affiliated with agriculture and energy/utilities also experienced a 13% jump, from 30% in April to 43% in May. This is the first time in over a year when so many small business owners in these sectors reported having trouble making the rent, largely due to inflation. 

Likewise, life was looking up last month for gym owners, who often struggled during the COVID crisis. But now they’re back on the list of those most challenged in paying their rent, jumping from 31% in April to 40% in May. 

Some Good News For Personal Services SMBs

Reviewing last month’s rent poll, several sectors that have consistently had trouble making rent payments are actually showing some improvement in May. Of course, that’s due to widespread vaccine distribution, reopenings, and reduced fear from some consumers. 

The big winners from April to May were in personal services categories. 
Massage therapists, who struggled with rent for 14 months, dropped 10 percentage points from 46% in April to 36% in May. Let’s hope consumers’ desire to get a massage is greater than worries about inflation as the recovery proceeds. 

Others in the win column were beauty salon and barber shop owners, dropping from 40% last month to 36% this month. 

Finally, professionals working in travel and hotels scored a win, too, as their percentages decreased from 39% in April to 36% in May, since more consumers are fully vaccinated and are booking trips. 

But How Are Minorities, Women & Veterans Doing?

As you can see from the May chart above, times are still challenging for all of these groups, but we witnessed some changes from April to May.

Minority-owned businesses continue to need more help with their recovery, as 45% still can’t pay full rent. But there’s a silver lining -- that number was 53% last month. And veterans remained at 31% for both April and May. 

However, the percentage of women-owned businesses who couldn’t cover the rent in May was up from 33% in April to 39% in May. 

And for nonminorities, the figure jumped to 37% from just 30% in April. 

How Did The States Fare In May?

The states with 40% or more of their small businesses reporting that they didn’t pay May rent include the following, all of which also saw increases from April: 

• Michigan (47%), up 12%
• Georgia (46%), up 10%
• Virginia (46%) up 15%
• Tennessee (43%), up 14%
• New York (40%), up 4%

Others states at or slightly above the national average of 37% are: 

• CT: 39%, up 7%
• OH: 39%, up 17%
• SC: 39%, up 6%
• CA: 38%, up 5%
• NJ: 38%, down 1%
• CO: 37%, up 8%
• IL: 37%, up 6%

And here’s where several others rank:

• MD: 36%, down 2%
• PA: 36%, down 5%
• WA: 34%, up 7%
• FL: 33%, up 1%
• MA: 33%, up 6%
• TX: 33%, up 2%
• IN: 32%, up 9%
• MN: 32%, up 11%
• NC: 32%, up 1%
• MO: 30% (no change)
• WI: 30%, up 5%
• AZ: 25%, down 6%
• OR: 24%, up 2%

For more information on the states, specifically, or more general insights about Alignable’s May Rent Poll, please contact me at chuck@alignable.com.

To see other polls we’ve conducted since March 2020, please go to the Alignable Research Center.

ABOUT THE ALIGNABLE RESEARCH CENTER

Alignable is the largest online referral network for small businesses with over 6.5 million members across North America. 

We established our research center in early March 2020, to track and report the impact of the Coronavirus on small businesses, and to monitor recovery efforts, informing the media, policymakers, and our members.