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Small businesses face challenges with hiring, inflation: Goldman Sachs

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June survey data from Goldman Sachs reveals that small businesses are recovering, but face challenges with inflation and hiring. Goldman Sachs 10,000 Small Business Voices National Director Joe Wall and Ethel's Baking Company Owner and CEO & Goldman Sachs 10,000 Small Business Voices National Leadership Council Member Jill Bommarito join Yahoo Finance Live to discuss.

Video Transcript

AKIKO FUJITA: A new survey out from Goldman Sachs reveals that small business owners are starting to see a recovery, but they still face three major challenges, including in hiring, inflation, and access to capital. To talk more about that survey, we are joined by Joe Wall, Goldman Sachs 10,000 Small Business Voices National Director, as well as Jill Bommarito, she's Ethel's Baking Company owner and CEO. She's also a member of the Goldman Sachs 10,000 Small Business Voices National Leadership Council. Good to have both of you on today.

Joe, let me start with you. Because this is an interesting survey at a time when we're talking so much about the challenges businesses face overall, especially in hiring. You're focusing on small businesses, but walk me through what it is that you found and what that suggests in terms of how quickly the recovery is likely to play out.

JOE WALL: Sure, and thank you for having us on this afternoon. We actually have been doing surveys every six or seven weeks dating back to last March. So this is actually our ninth survey since sort of the onset of COVID. So the data that we released earlier today shows a few things. Number one, small businesses are incredibly resilient and I think are generally optimistic about the direction of the country.

About 2/3 of businesses say they think the US is on the right track in terms of just the upward trajectory. And part of that is obviously just reflected in life coming back to normal to a great extent, which I think everyone is happy about. In terms of where we're seeing three roadblocks that you outlined, first, when it comes to hiring, the good news is 71% of the small businesses say they are trying to hire full time and part time employees. However, 81% say they are having a difficult time trying to fill their openings.

And then when it comes to the inflation issue, we found that 83% of small businesses that we surveyed have seen an increase in their operating costs in just the past few months. And 82% say they are very worried about the inflation dynamics that they're seeing in real time on their own business books. So far, about half of small businesses have raised their own products and goods that they are selling, but that number is obviously going to increase as time goes on, and their operating costs increase.

And then finally, on access to capital, which I think is a significant issue now that the PPP program is coming to an end, we found that 82% of small businesses that received a second PPP loan say they will exhaust their funding by the end of July. And only a quarter of them, 24%, say that they are very confident that they're going to be able to maintain payroll. One significant issue that is tied to that is that the natural segue for small business is now with PPP coming to a close, is that there's obviously a suite of SBA loan products available to them at a relatively low interest rate.

However, if you had a bad financial statement last year, which most businesses did, you are not going to be able to access those SBA loans just because the underwriting requirements. And so that's a significant problem and one that the small business owners, 93%, just about every one of them thinks that the SBA needs to reevaluate those loan terms in order to give a lot more small businesses access to the necessary capital. Whether it's to help them to recover from COVID, or for them to expand like Jill wants to do with her business.

AKIKO FUJITA: Jill, how have you seen some of those roadblocks that Joe just highlighted play out with your business. If we're talking specifically about operating costs, how much of an increase have you seen?

JILL BOMMARITO: That's a great question. Thank you, Akiko. It's across the board for us. So everything from raw materials, to our packaging supplies, our logistics, we've had increases from almost every single supplier. And a typical increase would be a 1%, a 2%, 4% maximum, however, we're seeing 11%, 13%, 14%. And that's on top of wages. We're paying more for labor today. We've increased our health benefits. So we haven't increased our price yet, but it feels fairly inevitable.

AKIKO FUJITA: I mean, how much runway do you have until you get there?

JILL BOMMARITO: We're working so hard on efficiencies. I'd say we have to reevaluate this in three months and take a look at it there. Thank goodness we have amazing partners on both sides.

AKIKO FUJITA: And Jill, on the issue of hiring, I mean, this is a challenge that we've heard from businesses across the board. What are you finding? What do you think is maybe keeping employees at bay? Or as you try to hire, what are you hearing from those who are saying-- look, this is what it's going to take for me to come back?

JILL BOMMARITO: Absolutely. So we're hiring across the board from a vice president of sales, we're recruiting for that right now, to an engineer, a mechanical engineer for our facility, as well as our production and packaging team members. The labor pool's just smaller. It's just smaller. And then on top of that, any positions that are under basically a $40,000 a year salary, there's incentives it feels to not necessarily be participating in the labor force right now. And we've had some challenges. At least that's the perception out there.

And then keeping them, there's always another great opportunity, what's around the corner, just know that we're an employer that always has paid at the top of the pay scale. We have great benefits for the company that we are in all of our competitors. So we've always seen ourselves as a leader and we're struggling.

AKIKO FUJITA: Joe, you talked about the challenges a lot of these businesses face with access to capital. And I think you bring up a good point about the SBA loans, especially on the back of what has been an incredibly challenging year for some of these small businesses. And I'm thinking back to the conversations from a year ago where there were dire forecasts of just how many small businesses would actually survive. As you look at the reality right now, what does that outlook look like for you?

JOE WALL: Well, I think there's no doubt, and Jill can attest that the PPP program, not only the first installment, but the second installment, saved a significant number of small businesses. I don't think there's been an accurate probably estimate to date. But the injection of capital at those moments in time, there's no doubt kept a lot of businesses afloat, and kept obviously a lot of their employees and their communities afloat.

We often forget that small businesses are at the epicenter of all of our local communities. And beyond keeping their doors open, they keep a lot of families going as well. And so I think, to be honest, this is, as I mentioned before, our ninth survey. This is the first one, where it feels like people are definitely adjusting their framework towards a more positive outlook.

But at the same token, and I think this is very important, while things are definitely feeling better, the road to recovery is-- we still got a ways to go in terms of getting fully back up on our feet. And I think Jill can speak to that. But in terms of their abilities, as Jill has outlined, to hire up both full time and part time employees, to keep their costs down, to keep-- obviously, in order to keep the costs off of the consumers, these are significant challenges they're facing. And I think when it comes to access to capital, that's a big, big problem that I think hopefully policymakers addressed in the near term. Because I think there is going to be a drought of capital as we approach the late summer.

AKIKO FUJITA: Jill, you agree with that sentiment? As you look down the line, how do you kind of had to adjust your operations beyond looking at potential price increases? How have you had to change your outlook given the challenging environment?

JILL BOMMARITO: Yeah, no, it's a great question. And to be really transparent, like we are a really fortunate company. We're growing. We're up over 200% over last year. So we are a company that you think everyone should be wanting to allow access to capital for growth and things like that. But some of the parameters that are out there can make it challenging for small businesses in general.

And so when I speak this, I'm really speaking for everybody in that small business community the challenges that they're facing. We'll continue to be nimble and be able to pivot. I mean, that's so important in this process. And we're looking at always, product mix, are there changes that we can make without ever compromising what we do. But most important is us all coming together as small businesses to be able to help raise the awareness that we're recovering. We're so thankful, but we have a long way to go as a small business community with our economy.

AKIKO FUJITA: Yeah, it's a good point. And a good insight especially coming from you, Jill, as an owner of a small business. Our thanks to Jill Bommarito, Ethel's Baking Company owner, as well as Joe Wall with Goldman Sachs.