SBA 7(a) Loans up to $500k Now Available

Business Insights

Using 7(a) Working Capital Financing To Fight Rising Costs Due To Inflation

Colin Fortner
7 minutes to read
Inflation in the United States has soared in the past year to 8.5% and according to many experts it is here to stay for the next 12-18 months. For many small businesses, taking out a business loan is the best way to combat inflation right now.
Inflation in the United States has soared in the past year to 8.5% and according to many experts it is here to stay for the next 12-18 months. The rise in the Consumer Price Index (CPI) from November 2020 to November 2021 was the largest 12-month increase in approximately four decades.  

Across the United States, inflation has emerged as the dominant challenge for small businesses due to rising costs. 

Among surveyed small business owners, 90% report the cost of services and supplies to operate their business has increased, 55% report they are concerned about the financial health of their business, and 70% report the rising costs of inputs significantly impacted their operations within the past 12 months.  

Over the past year, small businesses have experienced a trickle-down effect of challenges due to inflation including:  

  • Damaged financial health of the business 
  • Lower profit margins 
  • Decreased customer satisfaction with goods and services 
  • Reduced sales 
  • Increased demand for higher wages from employees 
  • Cash flow struggles 
  • Increased energy costs 
  • Increased supplier costs 
  • Increased shipping costs 

Unlike larger businesses, rising inflation impacts small businesses to a much larger degree because it hits their bottom line and they do not have access to abundant capital markets and large savings accounts. In turn, small businesses have limited purchasing power and are forced to mitigate the impacts of inflation in a myriad of ways while already operating within thin margins.

Since the beginning of the pandemic, approximately 50% of small business owners have reported they are operating with decreased profit margins due to inflation.  According to many surveys, approximately 66% of small businesses over the last year have had to raise their prices for their goods and services.

Passing along the rising cost of inputs to customers to combat the rising inflation is concerning to most small business owners because it is not sustainable, and it will deter customers. In addition to raising prices, many small businesses have resorted to combatting rising inflation using other techniques such as: reducing inventory, reducing expenses, focusing on employee retention, reducing payroll, reducing the quality of the deliverable, investing in business technology, and obtaining a business loan.

For many small businesses, taking out a business loan is the best way to combat inflation right now. With inflation predicted to remain at the current rate or increase for the next 12-18 months, a business loan with long-term, low interest financing tied to a stable WSJ Prime Rate is a great tool for fighting inflation!  

Small businesses that obtain financing through an SBA 7(a) loan now can increase their purchasing power for operational expenses before their rising cost in the future becomes prohibitive and they can increase their access to capital for expenses such as payroll, rent, and utilities.  

Here at NEWITY, our SBA 7(a) loan experts are aware of the challenges small businesses and their owners face in today’s unstable world. We have provided long-term, low interest financing to several small businesses through our SBA 7(a) Working Capital Loan program, which has equipped our members with the best tool to fight inflation in the current environment.  

Meet One Of Our Members

Tim is the owner of a small construction company in FL whose highest operating expenses are construction supplies including lumber and steel.  

Tim’s business is contingent upon bidding on highly competitive jobs within various school districts. Unfortunately, due to inflation the cost of steel and lumber has skyrocketed over the last year and Tim is unable to pass along the rising costs in his bids to the school districts if he hopes to secure the contract. In Tim’s industry, if he were to pass along the rising costs of the lumber and steel, he would no longer be able to remain competitive.   

With NEWITY’s SBA 7(a) Working Capital Loan offering, Tim was able to secure $25k in working capital financing and will pay approximately $280 per month over the next 10 years. The loan provided Tim $25k in construction supplies purchasing power at a low monthly payment, allowing him to continue to bid competitively on jobs he otherwise would have lost.   

Connect with NEWITY to see how a 7(a) working
capital loan can be a gamechanger for your business.

Learn More

To qualify for an SBA 7(a) small business loan, your business must be:

  1. U.S.-based and operated
  2. Owner supported / owner funded
  3. Eligible per the SBA’s requirements

Your loan amount will determined by the business’ average annual revenue, FICO score, and years in business