Inflation Causing 45% of Small Biz Owners to Take Out Loans, 41% to Cut Staff

With inflation running at 6.8% for the 12 months ending in November, rising prices are having a big impact on small businesses in America.

This quarter, inflation is among the top-cited concerns for small-business owners (23%), along with revenue (26%), and COVID-19 safety/compliance (21%), according to an online survey of 750 small-business owners and decision-makers conducted by MetLife and the U.S. Chamber of Commerce, which compiles the Small Business Index.

Overall, 74% of small-business owners are concerned about the impact of inflation on their business, with 71% saying rising prices have had a significant impact on their business in the past year. To manage higher costs brought about by inflation, 63% have increased prices of their products or services, nearly half (45%) have taken out a loan, and 41% have cut staff.

The deteriorating labor shortage and supply-chain dislocations are also major concerns. A total of 61% of small businesses say the COVID-19 pandemic has dramatically disrupted their supply chain, and 55% say worker shortages have also been disruptive. Owners are also concerned about fewer applicants for job openings, employee retention, and employee well-being/morale.

Small-business owners’ optimism around hiring and investment plans scored 63 for the MetLife and U.S. Chamber of Commerce Small Business Index, up from last quarter’s score of 56.6.

More than 3 in 4 (77%) small-business owners are optimistic about the future of their business, according to the poll taken Oct. 13-27, 2021.

Despite ongoing labor shortages, 38% of small-business owners plan to hire more staff next year, up from 28% last quarter, and the highest mark for this measure since the Index launched in second quarter 2017. More than 4 in 10 (42%) plan to make more investments in their business in the coming year — an increase of 13 percentage points from last quarter.

“Small-business owners’ optimism is plowing through economic uncertainty, but they now face new obstacles with rising inflation, labor shortages, and supply chain challenges,” says Tom Sullivan, vice president for small business policy at the U.S. Chamber of Commerce. “Addressing these challenges will be key to sustaining Main Street’s optimism and the nation’s economic recovery.”

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