Operations that emerged from the pandemic had advantages: there were no business practices to fall back on, or legacy costs such as office rents. Many businesses were built around remote operating environments and sanitary precautions. But they were no more prepared than existing businesses for rising inflation and rising interest rates. And, unlike established enterprises, they did not have access to most of the assistance programs offered by the federal government.
Irina Sirotkina sold her shares in a construction company at the beginning of the pandemic, when contracts for new hotels and office buildings expired. She used that money to open a bakery in October in Battle Ground, Wash. Although orders for her cakes and pies have been numerous, customers have resisted even the smallest price increases. The costs of her main ingredients — eggs, butter, milk and flour — have risen 13 to 49 percent since she first fired up the ovens. So far, profits have been elusive, potential customers are cutting back on city drives and there is no new wage protection program.
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“We used all our resources to make it because we didn’t qualify in the first, second or third round” of that program, Ms. Sirotkina. “But how far will we have to go before we get help?”
New businesses and those run by people of color have particular difficulty obtaining bank loans, so they often turn to online lenders that charge high interest rates for short-term financing. Last year, hoping to ease access to credit, Congress appropriated $10 billion to be distributed through lenders with the express purpose of reaching underserved entrepreneurs; the money is still flowing.
However, signs of weakness are emerging. Gusto, a payroll and benefits provider that serves 200,000 small businesses, has seen an increase in layoffs among its users. That’s important, said company economist Luke Pardue, because smaller employers typically don’t want to let people go.
“For a small business, 10 percent of its workforce may be its human resources department,” said Dr. Pardue. “Each employee really has a specialized importance that might not be present in a larger company, so any swings you might see are more meaningful.”
