Operations that arose from the pandemic had advantages. no business practices to upend, or legacy costs like office leases to carry. Many businesses were built around remote operating environments and sanitary precautions. But they weren’t any more ready than existing businesses for soaring inflation and rising interest rates. And, unlike established enterprises, they did not have access to most relief programs offered by the federal government.
Irina Sirotkina sold her stake in a construction company early in the pandemic, when contracts for new hotels and office buildings dried up. She used that money to open a bakery in October in Battle Ground, Wash. Although orders for her cakes and pies have been pouring in, customers have resisted even the smallest price increases. The costs of her main ingredients — eggs, butter, milk and flour — have climbed 13 to 49 percent since she first fired up the ovens. So far, profits have been elusive, would-be customers are cutting down on car trips into town and there’s no new Paycheck Protection Program in sight.
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“We’ve used all our resources to make it, because we didn’t qualify the first, second or third round” of that program, Ms. Sirotkina said. “But how far are we going to have to make it before we get help?”
New businesses and those run by people of color have particular difficulty obtaining bank loans, so they’re often driven to online lenders that charge steep interest rates for short-term financing. Last year, hoping to ease access to credit, Congress allocated $10 billion to be funneled through lenders with the express purpose of reaching underserved entrepreneurs; the money is still trickling out.
Nevertheless, signs of weakness are appearing. Gusto, a payroll and benefits provider that serves 200,000 small businesses, has seen an uptick in layoffs among its users. That’s significant, said the company’s economist, Luke Pardue, because smaller employers are typically loath to let people go.
“For a small business, 10 percent of its workforce might be its HR department,” Dr. Pardue said. “Every employee really does have some specialized importance that might not be present in a larger company, so every swing you might see is more meaningful.”