Wendy Cai-Lee, CEO of Piermont Bank, has decades of experience in finance & business advisory. She advocates on banking for growing SMBs.
Faced with a rocky start in 2025, triggered largely by tariffs and global trade tensions, the mood of the small and medium-sized business (SMB) world today is shifting into a mix of cautious optimism and anxiety.
Although the U.S. Department of Commerce affirmed in early March that Americans should “absolutely not” brace for a recession, the National Federation of Independent Business’ Uncertainty Index revealed that confidence in economic certainty suffered its largest decline since the onset of the pandemic.
As we navigate through rising uncertainties today, the rule of thumb for SMBs is undoubtedly to avoid panicking or rushing into reaction without resilient solutions for the long haul. On the other hand, inaction or procrastination could leave SMBs unprepared for potential storms. In my experience as a banking executive weathering economic turbulence in the past two decades, I’ve seen businesses benefit tremendously when they acted deliberately to partner with banks and leveraged their well-positioned access to capital.
In today’s situation, there are a few fundamental strategies that SMBs, startups and entrepreneurs can implement to prepare for any economic uncertainties ahead and position themselves for transition into the future.
Consider flexible capital to support your business.
Now may be an ideal time for some SMBs to leverage a line of credit. Economic uncertainties due to mounting tariffs, unpredictable policy changes and potential supply chain disruption mean that cash flow can become erratic and harder to predict.
How is a line of credit helpful for SMBs? It provides flexible access to funds that can be used for day-to-day operational costs or unexpected expenses. It’s a financial cushion and can help manage fluctuations in financial needs.
Having a line of credit allows businesses to borrow only what they need and when they need it. I’ve found that this flexibility can make it a lifeline during periods of financial strain, giving businesses extra “dry powder” for operations, especially when facing unexpected costs or waiting on receivables.
Let’s take a retail business as an example. If the store needs to scale quickly to meet new demand or needs to stash up inventory due to supply chain interruption, a line of credit allows the store to do so without the hassle of applying for a new loan. With approval in place, funds can be accessed almost immediately.
Remember that getting a lending facility in place isn’t instant; it takes planning, documentation and a significant investment of resources to move through the credit underwriting process. This can take weeks, even with a bank that can execute fast. It will also require operational investment and can sometimes be disruptive for management and the business. As business owners, you will therefore need to decide on the timing and manage your team’s capacity.
Another consideration before getting a line of credit is the financing cost. There are costs associated with getting the line of credit, including an origination fee, third-party appraisal fees, documentation fees and other related fees. All of these can add up and should be evaluated before getting financing. In addition, depending on how the deal is structured, there could be an unused fee associated with the line of credit. That’s another cost consideration.
Boost efficiency by replacing high-cost debt with smarter financing.
If your business has existing high-interest debt or loans with unfavorable terms, try to refinance it to reduce monthly payments or secure more favorable terms. In times of economic instability, restructuring debt can improve cash flow, which allows the business to stay afloat or invest in growth opportunities.
For small businesses that typically start their lending relationships with nonbank small business lenders, if the businesses have grown in the last few years, it can be worth exploring the lending relationship with a bank. Bank financing is generally a lot cheaper and helps create efficiency.
But while it is usually more cost-efficient, the underwriting criteria can be stricter and require ongoing compliance with loan covenants. The lending relationship is an ongoing relationship and requires continuous efforts to maintain it.
Squeeze for additional cash by optimizing cash flow management.
In uncertain economic times, tightening your cash flow management is vital. First and foremost, check with your bank to ensure your checking account is interest-bearing, and consider upgrading your savings accounts to the high-yield savings category.
You can also talk to your banker about cash management services that help track and manage your business finances, automate payments, optimize cash flow and even accelerate receivables collection. Effective treasury management enables businesses to meet their financial needs across various departments, facilitating accurate forecasting and ensuring the business remains financially stable.
You can often reduce wire fees by maintaining a higher account balance or choosing a checking account that includes a set number of free wire transfers.
Alternatively, you can contact your bank to determine if enrolling in an analyzed business checking account makes sense. It is a type of account that allows you to generate a credit using the deposit balance, which is used to reduce or eliminate transactional costs and service charges.
Of course, when considering any banking product, communicate with your banker transparently and factor in all the pros and cons, as well as the possibility of continued downturn and uncertainty. Prudently calculated resilient strategies have worked their magic in the past. They can do it again.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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