Interest rate hikes impact everyone, and small businesses small businesses are being hit especially hard at the moment. While monetary policy set by the Federal Reserve aims to curb inflation, there is a lag time for the effects to work. Meanwhile, small business owners face rising gas prices, price hikes related to the supply chain, ever-increasing labor costs, and a constantly rising cost of capital due to Fed interest rate hikes.
According to the 3Q22 U.S. Chamber of Commerce Small Business Index, half of small businesses say inflation is the top challenge, a drastic 31-point increase from a year ago, and 71% believe when it comes to inflation, the worst is still to come. In response to inflation pressure, 67% of small business owners have raised prices. Yet another sign of small business pessimism: 88% of small businesses are concerned about the U.S. entering an economic downturn next year.
Expert Rohit Arora, CEO of Biz2Credit, said:
“It’s a hard reality. Monetary policy always has a time lag, and the results will take place next year,” says Rohit Arora, CEO of Biz2Credit and one of the nation’s leading experts on small business finance. “It’s a tough time for small business owners, whose financing is usually at an adjustable rate, so they have already felt the impact of higher borrowing costs. At the same time, labor markets haven’t calmed. A recession is coming, but that may not be an entirely bad thing because if a recession doesn’t come, inflation will continue. “
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