Small businesses have to work harder have to sell more to attain the same level of wealth.
The Fed has now increased interest rates several times over the last year. During most of the past decade, they have been near zero. Financing now costs more than it has in a long time, and business owners must manage for that reality. For the first time since 2008, business owners are encountering interest rates above 10%, depending on the lender.
· Economic behavior of small businesses in the post-vaccination inflationary phase was very different from the pre-vaccination phase. In the pre-vaccination phase , small businesses conducted severe cost-cutting in the face of falling revenue, with both dollars per expenditure transaction and the number of transactions falling by 14% and 8% respectively.
· As inflation accelerated, consumers were also increasingly stressed by rising prices. In the post-vaccination recovery, revenue increases outpaced inflation, but by Q2 2022, revenue growth fell below the rate of quarterly inflation. This first-of-its kind study was based upon transactional cash flow data comprising nearly 105 million cash inflow and cash outflow transactions from small businesses on Biz2Credit’s online marketplace. Unfortunately, the spike in prices came just as the economy was recovering from the initial waves of the pandemic and created a new set of challenges for small businesses. Many of them are still hurting.
The study also looked at how inflation impacted small business behavior for individual expenditure items, namely energy prices . Rapidly increasing gasoline prices in 2022 significantly hurt the Transportation and Warehousing industry, for which fuel is an essential input. Between Q1 2022 and Q2 2022 — when quarterly average gas prices rose from $3.78 per gallon to $4.
. “With the current volatile economy, we encourage small businesses to visit their local Small Business Development Center for guidance on creating a manageable path forward."Inflation during the post-vaccination COVID period led to significant changes in small business activity. In 2023, there is considerable uncertainty remains related to continued inflation, additional spikes in gasoline prices, further increases in interest rates by the Federal Reserve, and weaker economic growth....
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