High US interest rates add to headwinds for small businesses
Business
High US interest rates add to headwinds for small businesses
(Reuters) - After Ron Hall took out a $407,000 Small Business Administration loan last year to open a franchised sandwich shop in his hometown in Tennessee, business boomed.
He hired 15 employees and even snapped up a used Honda CR-V that he covered in his store's logos to sell sandwiches in the parking lots of local factories during lunch hours. Early on, the 49-year-old father of two said he was seeing $3,000 a day in total sales.
But monthly payments on his SBA loan, which carried a 7% interest rate in May 2022, snowballed by almost $1,000 a month to $6,000 as the rate rose to more than 11% over the past year, in step with aggressive Federal Reserve rate hikes to tame high inflation.
Other financial pressures bore down. The price of lettuce and french fries surged, he said, and his mostly working-class clientele, struggling with higher grocery and fuel prices, cut back on eating out. Daily sales now seldom exceed $1,100 and Hall has cut his workforce to seven.
"It feels like everything went sideways," he said.
That sentiment seems to be shared by many U.S. small businesses. A recent survey of its members by the small business networking group Alignable found that 58% said they were being hurt by high interest rates - up from 45% who said so in June. In a follow-up question, 24% said paying back SBA loans or securing new ones from the government agency has become much harder.
