SMBs Poised to Live Paycheck to Paycheck, Too, Amid Soaring Operating Costs

Call it the paycheck-to-paycheck economy, in a way – for the Main Street small business.

Inflation hits home everywhere, and as tracked by PYMNTS, has been and likely will remain a concern for the small and medium-sized businesses (SMBs) that power the U.S. economy.

Back in January, we found that the two-thirds of SMBs were optimistic about their top line, and general growth, prospects even though inflation was top of mind.

And yes, sales growth has been a hallmark pretty much across all manner of verticals, with many companies able to pass along at least some of their own increasing input costs.

But, then again, one of the biggest input costs, which is true across the board for individuals and corporates alike, remains the rent.

Data from Alignable released at the end of last month revealed that as many as 40% of SMBs surveyed were delinquent in their rent, where increases in the costs tied to supplies and for labor were at least partly to blame for those delinquencies.

The juggling of it all is real, and the juggling leads to struggling.

As spotlighted in these digital pages in recent months, there’s at least some relief to be seen with innovation in the mix. We’re talking about technological innovation, of course, which can do much to cut down on manual, repetitive tasks, and which can even help utilize existing physical plants more effectively.

Reconfiguring the Footprints

We contend that there is also the looming possibility that adopting everything from robotics to a (greater) omnichannel presence can help these smaller companies actually reduce some of the overhead caused by maintaining warehouses or storefronts. The shift would be most keenly felt by retailers: PYMNTS/Melio joint research has revealed that 57% of retailers surveyed said they will spend on digital connectivity in that timeframe, with 32% focused on equipment.

Beyond the efforts to refashion, retool and streamline operations, there are of course opportunities to better manage expenses. After all, better cash flow management means that SMBs can be a bit more proactive about matching liabilities and the day in day out activities of money in, money out. There are any number of FinTechs seeking to help hasten the movement of SMBs toward a better, holistic picture of their financial ebbs and flows, particularly through small business financing done digitally.

In one recent example, small business financing FinTech Kapitus increased its funding capacity by $95 million, bringing its total debt facilities to $360 million. The financing here, and on offer from other companies, too, would conceivably be a boon to the smaller companies that have been falling behind on their rental obligations. Among the findings in our Main Street trackers: As many as 18% of SMBs have no available cash on hand; the situation is even worse for the 25% of SMBs that sell mostly through physical locations (and thus would likely have at least some monthly rental expenses to meet).