Inflation is Impacting Merchants, and Capital Providers are Noticing

As the Department of Labor survey reported sky high inflation this week, the 7.5 percent rate is starting to impact the small business financing industry. With things like gas, food, electric, and oil leading the way in rising costs, merchants are requesting more capital, or none at all — as inflation continues to rise.

“I read that 45% of small businesses say they have dealt with inflation by taking out a loan over the past year,” said Ronald Curiel, Business Development Manager at Advantage Capital Funding. “Small businesses are the backbone of the U.S economy and a lot of businesses are relying more and more on small business financing to get them through times of high inflation.”

Small businesses have been forced to raise prices in many areas. Delis are adding surcharges to bacon, lunch deals are disappearing from pizza parlors, and delivery minimums are being raised. According to Curiel, the need for financing has gone hand-in-hand with the rise in inflation. 

With payroll costs at a two-decade high and prices of goods going up seemingly exponentially, capital providers might be able to leverage this to fund merchants who haven’t raised their prices or expanded in order to keep up. The challenge is that if inflation keeps rising, businesses will certainly need to put those funds to good use.

Inflation has even hit the equipment financing sector too, with merchants holding whatever cash they have left in hopes of prices of machinery coming down. “We have seen an increase in clients putting off Equipment purchases until the prices of equipment come back down to realistic prices,” said Josh Feinberg, CEO of Everlasting Capital.

“[Merchants] are saying they have seen the prices increase between 20 and 40 percent, which impacts our ability to help business owners scale.”