But only requires 1% increase in revenue to sort out.

No! A 1% increase in revenue in this situation does make you profitable again, but only barely, and only with some possibly invalid assumptions.

Say you make $100 in revenue and $1 in profit, and $1 of your $99 in costs is debt service. Your debt service increases to $2, your profit drops to zero.

Now your revenue increases to $101, presumably your debt costs stay fixed (this is not a guarantee - revenue expansion costs money), but your non-debt-service costs scale as well, and they are now 0.98 * $101 + $2 in debt service = $101.98. Congratulations, your profits are positive again, but they are $0.02.

I am eliding here the general difference between fixed costs and variable costs, and so it's probably not true that your costs would scale quite this much with revenue, but it's much closer to the truth than that you'd be back where you started, esp. in a low margin business.

There's a reason margins are what they are in a competitive market. "Your margin is my opportunity," as Lord Bezos famously said. Only companies that have captured their market get to raise prices to cover new costs, and all it does is induce people who want to own that margin to find flaws in the business model. This is how Netflix wrecked Blockbuster, and how Amazon killed off chain bookstores.