US Small-Business Owners Say Damage From High Rates Will Persist

Half of U.S. small-business owners say that rising interest rates over the past 18 months have eroded their margins, reduced revenue and reversed their growth, a survey conducted by Alignable showed.

(Bloomberg) — Half of U.S. small-business owners say that rising interest rates over the past 18 months have eroded their margins, reduced revenue and reversed their growth, a survey conducted by Alignable showed.

Rates would need to fall substantially before business would improve, according to the online referral network for small businesses. The survey is based on a poll of 7,396 randomly selected small-business owners from Aug. 4 to Sept. 18.

More than two-thirds say that a decline in interest rates of at least 3 percentage points would be needed before they envision business activity rebounding again.

Among the reasons cited for the decline in business were variable-rate Small Business Administration loans which change based on the actions taken by the Federal Reserve. The Fed has increased the range of its benchmark rate by more than 5 percentage points to a 22-year high of 5.25% to 5.5%.

Others cited the cumulative effects from labor issues, rent spikes, inflation and an inability to raise prices at a similar pace. A pickup in gasoline prices has also had a negative economic impact.

The real estate industry and housing-related services were the most impacted by higher borrowing costs. 

Small-business owners say the pain is getting worse too. Some 53% reported that they’re making half or less than what they earned prior to the pandemic. That’s 3 percentage points higher than the 50% reported in the prior month, according to Alignable.

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