The Top 2025 Economic Trends for Small Business Owners
Small business owners will face dynamic economic terrain this year. From evolving consumer behaviors to shifts in supply chains and technological advancements, 2025 will likely offer rewards if small business owners can be patient, resilient, and alert.
To get the inside scoop, I talked to bankers and other financial experts who shared their insights on how entrepreneurs can best navigate a still uncertain economy.
Building a Strong Economic Foundation for the Future
After navigating high interest rates, inflation, and an uncertain business environment, business owners are showing cautious optimism—planning for growth and expansion this year to build a strong foundation for their futures. Recent Bank of America research found most business owners feel confident in the economy and anticipate their revenues will increase in the year ahead.
Business owners are also closely monitoring the broader macroeconomic environment and evaluating their plans and comfort around access to capital in the coming year. While we have seen two recent rate cuts by the Federal Reserve, we anticipate business owners will continue closely monitoring interest rates throughout 2025 and adjust their business and expansion plans accordingly.
From conversations with clients and broader observations of our industry, I expect a strong year for business owners as they continue to manage, sustain, and grow their businesses and achieve entrepreneurial success in 2025.
—Sharon Miller, President and Co-Head of Business Banking, Bank of America
What Should Small Businesses Focus on in 2025?
Businesses must assess what has been working well and where they may need to improve. This reflection should include evaluating whether your pricing strategies have worked, if your resources have been deployed effectively, and planning for future demand and cash flows. Setting goals for the new year and implementing tactics to execute them successfully is critical.
One key trend to focus on is the cost of goods and services. I anticipate price stabilization in the cost of raw materials and labor, with some minor fluctuations based on seasonality and product distribution. The start of interest rate cutting by the Fed signals confidence in price and employment stability, allowing businesses to plan with more certainty.
The increased certainty should give SMBs the confidence to invest in expanding and improving their businesses. Purchasing new equipment, hiring employees, and expanding in key areas can be facilitated by carefully adding debt to support growth.
—David Quinn, CFO, Bluevine
Navigating Choppy Waters
Economic uncertainty will continue into 2025 domestically and internationally, and we expect the macroeconomy to remain choppy. To prepare, small businesses should work closely with their banking partners and either maintain their current line of credit or secure a new one to have rainy day funds on hand. Additionally, it’s essential they stay close to their customers, figure out how best to serve them, and then use that as a road map for the future.
With 51% of all small business owners being 55 years old or older as of 2021 and over two-thirds of small business owners planning to retire soon, we expect to see a lot of great businesses looking to transition or sell in the next few years. The SBA lending program will be a good opportunity for those looking to capitalize on this by acquiring a business.
Additionally, we expect to continue to see M&A in the franchise space, with a recent TD Bank survey finding that 84% of restaurant operators and financial professionals expect M&A activity in the industry to increase over the next year, likely due to improved profitability and a better interest rate outlook.
Automation of administrative tasks will continue to be a major focus on the lending side in 2025. Investing in technology to simplify the loan application process streamlines it, allowing loans to be closed faster in a market where customers expect seamless borrowing experiences.
—Tom Pretty, Head of SBA Lending, TD Bank
2025 Small Business Outlook
The key question for small businesses is how the economy will change in 2025 and, more specifically, how the political and economic changes promised by the Trump Administration will impact inflation, interest rates, unemployment, taxes, and tariffs. Will these changes be a net positive for small business owners?
We anticipate a combination of outcomes, but the trend will be toward lower taxes, tighter labor markets, higher tariffs, and continued economic stimulus in the form of wide budget deficits. As a result, we expect the economy to grow in 2025, but inflation will accelerate. Small businesses will have difficulty balancing capturing economic growth while weathering accelerating costs.
How will the small business economy fare in 2024?
Inflation: The Federal Reserve has successfully brought inflation under control without causing a recession, a feat many of us viewed as unlikely when inflation peaked at 9% in June of 2022. Unemployment remained low, and wage growth is helping consumer purchasing power catch up to prices, which are rising more slowly.
The Fed intends to continue its loosening bias as long as the economy does not grow too fast and inflation remains low. Inflation is expected to drift lower throughout 2025, barring a major policy intervention or significant changes to Fed policy. However, we view many of the stated policy goals of the incoming administration as inflationary. The business community, fresh on the heels of the last inflation shock, will be watching policy changes closely and is prepared to act quickly should inflation return.
The global supply chain: The global supply chain today is functioning better than it was several years ago. However, critical issues continue to challenge small businesses in sourcing materials and selling overseas. In 2024, persistent disruptions in the global supply chain stemming from wars, pirating, strikes, infrastructure failures, and inclement weather combined to disrupt the global trade flow. Now, the threat of significant tariffs on large U.S. trading partners is forcing wholesalers, retailers, manufacturers, and other business owners to reexamine their supply chains and develop sourcing strategies that reduce the cost of tariffs while still ensuring the timely delivery of goods.
Small businesses have learned from previous disruptions the benefits of shorter supply chains and greater onshore production. We expect to see continued growth in domestic manufacturing and the integration of new technologies that promote automated production.
The political environment: When the Trump Administration enters office, we’ll likely see an agenda that includes lower taxes, less regulation, smaller government, higher tariffs on imported goods, tighter immigration standards, and a reduction in the undocumented population. The business community will embrace lower taxes and less regulation, while the long-term popularity of the other initiatives is debatable. Business owners will be watching these developments closely as they will impact inflation, the cost of capital, the cost of goods sourced overseas, and overall economic demand.
Although 2025 presents considerable economic uncertainty, we are optimistic that the economy is poised for continued growth if inflation remains low. We expect market-friendly policies to prevail and believe that now may be a good time for business owners to work on a growth plan and have contingency plans in case inflation creeps back into the picture. This means determining what financing a business is likely to need.
While many banks have scaled back their exposure to business credits, many non-bank small business lenders are ready to fill the funding gap left when banks began to tighten. When a clear view of the economy unfolds, we expect 2025 to emerge as a prosperous and exciting year for business owners.
—Ben Johnston, Chief Operating Officer, Kapitus
How Small Businesses Can Financially Navigate 2025
Small business owners will confront a shifting financial terrain in 2025, with fluctuating interest rates and evolving funding sources. Tapping into private credit, SBA loans, CRE equity, and tech-driven lending platforms offers vital support for cash flow and capital purchases, helping businesses move forward amid economic uncertainty.
Private credit remains a cornerstone of flexible financing, delivering custom-fit solutions with rates that adjust to market conditions. Breaking from the rigid structure of traditional loans, private credit adapts to each business’s unique needs, empowering owners to manage liquidity and seize growth opportunities. As interest rates change, private credit adaptability becomes crucial for maintaining financial stability.
SBA loans and CRE equity expand funding possibilities. While SBA programs offer government-backed loans, the underlying index on which SBA 7(a) loans are priced is WSJ Prime, which has fluctuated over the past four years and currently sits at 7.75%, affecting cash flow for businesses with variable-rate loans. Still, these loans remain valuable for equipment purchases, expansions, or debt refinancing. CRE equity allows businesses to leverage their real estate value, turning property assets into working capital for strategic moves. These tools form a solid foundation for cash flow management and capital investment.
Technology-driven lenders are revolutionizing access to these financial instruments. Digital platforms provide swift, user-friendly applications with automated underwriting, reducing the time and complexity of securing funds. These platforms also connect businesses with diverse funding sources, including fractional investments, democratizing capital access. By leveraging technology, small business owners can quickly secure the financing they need to adapt to a rapidly changing market.
Combining private credit, SBA loans, CRE equity, and cutting-edge lending platforms allows small businesses to craft a diverse, agile funding strategy. By embracing these financial tools and sharpening risk management skills, business owners can navigate the challenges of 2025 and chart a course for sustainable growth, even as economists predict potential interest rate shifts as inflation stabilizes.
—Sanat Patel, Co-Founder and Chief Lending Officer, AVANA Companies
Maintaining Cash Flow
To no one’s surprise, maintaining a healthy cash flow will remain top of mind for small business owners in 2025. However, we expect to see economic shifts this year due to inflation, consumer economic confidence, and administration changes in the White House. While interest rate cuts could boost optimism, lingering uncertainty around inflation, cost of living and wage increases, and the financial impacts of tariffs on the horizon mean small businesses must plan carefully for potential economic downturns.
This could also lead to a rise in small business owners seeking professional financial advice. The 2024 State of Women’s Small Business Report by Block Advisors found that tax preparation and bookkeeping rank as the least favorite tasks for business owners, followed by social media management and marketing.
—John Towle, Director of Small Business at Block Advisors by H&R Block
The Future of Payments
Small business owners value flexibility in payment terms, currency, and methods. Flexibility allows owners to operate in a manner that is most convenient and efficient for their businesses.
As cryptocurrency payments become more common and widespread, allowing SBOs to pay with crypto or accept crypto as a form of payment is consistent with the concept of greater flexibility.
—Eyal Lifshitz, Co-founder and CEO, Bluevine
Outlook for Small Business Lenders
Recent survey data reveals that many financial institutions are actively seeking to grow their small business lending portfolios. Our Customer Lending survey shows that 88% of respondents expect small business loan demand to increase with the Federal Reserve rate cuts.
We also expect that:
• Compliance will take center stage for small business lenders: Financial institutions must adapt to an evolving regulatory landscape related to small business access to financial services, including lending. They must prepare for section 1071 small business reporting requirements, which require changes to lending processes and culture. They will also monitor CRA modernization, other aspects of the Dodd-Frank Act, the Corporate Transparency Act, and the newest CFPB rule 1033. All these regulations require changes to data collection, and financial institutions will respond by implementing project management, automation, and new technology to efficiently meet these compliance needs.
Fair lending risk management and consumer protection risk management will be in focus as institutions strive to comply with Section 1071 and other regulatory requirements that impact small businesses’ access to financial services, especially given the regulatory focus.
• Pricing and credit risk management will determine the winners: Institutions are concerned about managing interest rate risk, another critical factor that impacts small business lending, especially in a potentially declining rate environment. Financial institutions will need to ensure they are effectively pricing loans for small businesses, managing net interest margin, and balancing their loan portfolios to remain competitive and profitable.
The uncertainty in interest rates could affect banks’ willingness to lend to small businesses and the terms they offer, making effective rate management a key aspect of supporting small business lending. Stress testing concentrations within loan portfolios and proactive credit risk management will receive examiner attention regarding small business lending.
• Efficiency will be crucial for institutions seeking to support growth in small business lending: Given the likely pressure on net interest margin as deposit pricing is expected to decrease more slowly than loan pricing and given new data-collection requirements, expect more institutions to roll out small business lending optimization initiatives that leverage dynamic applications. They’ll look for increased automation (if it has human-in-the-loop capability) to enhance the efficiency of lending processes while helping them comply with Section 1071 and other regulatory requirements.
Emphasizing reducing manual workloads and streamlining the small business lending process will help lenders provide small businesses with better access to credit so they can thrive.
—Jay Blandford, CEO, Abrigo
RELATED: How AI Is Transforming the Small Business Workplace
