March 1, 2025

Let’s Talk Tariffs

Shane Pierson, Stephanie Dunn & Brian Congelliere

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How Tariffs Impact Small Business Loans: What SBA Borrowers Need to Know | Let's Talk Tariffs

You ever wake up, check the news, and suddenly the cost of everything your business depends on just went up 25 percent? No warning. No heads up. That is what tariffs do to small businesses — and it is happening right now. In this solo episode of Lords of Lending, Shane Pearson breaks down exactly how the latest round of tariffs will hit your margins, your loan eligibility, and your ability to keep the doors open.

In this episode: Shane walks through the 25 percent tariff on goods from Canada and Mexico — what it actually means for small business owners, where the pain hits first, and what you can do about it before it is too late. He covers material cost spikes, supply chain delays, customer pushback, and the cascading effect on your ability to qualify for an SBA loan. Then he lays out practical strategies: diversifying suppliers, locking in contracts, cutting waste, adjusting pricing without losing customers, and knowing when to apply for capital before the squeeze gets worse. This is not a political debate — it is a survival briefing.

Key Takeaways

1. Tariffs Are a Tax on Small Businesses — and the Pain Cascades Fast

Shane strips away the policy debate and goes straight to the math. A 25 percent tariff on imported goods is a 25 percent tax on your cost of goods sold if you rely on those supply chains. Big corporations can absorb it. Mom and pop businesses get wrecked.

He uses the gas station industry as a real-time example. When commodity prices spike, a station owner has to raise pump prices immediately — even though their current inventory was bought cheaper. If they do not, the revenue from this week's sales will not cover next week's wholesale cost. The margin gets squeezed from both directions until there is not enough capital to fill the tanks underground.

"A small machine shop that uses imported steel just would have seen the cost jump 25 percent overnight. How do they absorb that? And the reality is most of these guys don't have enough cash in the bank to be able to do that." — Shane Pearson

The same principle applies to any business with a dependence on imported raw materials, textiles, food ingredients, or manufactured components. The tariff does not care about your operating budget. It hits your supplier, your supplier passes it to you, and now your entire P&L shifts overnight.

Shane identifies four pressure points that will hit first:

Material costs — anything imported from tariff-affected countries goes up immediately
Supply chain delays — suppliers hold inventory waiting for costs to stabilize, echoing the COVID-era port slowdowns
Customer pushback — consumers feel the price increases on everything from groceries to services, which slows your sales
Loan approval risk — lower profit margins make lenders nervous, and nervous lenders say no

2. Your Margins Are Your Loan Application — Protect Them Now

I think this is where the tariff conversation gets personal for anyone who needs capital. Banks watch your margins year over year. Shane has seen it from the inside for nearly 20 years — when an underwriter spreads out your financials and sees shrinking profits, the conversation shifts from "how can we help" to "why should we take this risk."

The tariff itself is not the problem in a lender's eyes. What matters is how you responded to it. Did you diversify suppliers? Did you adjust pricing? Did you cut waste? That response tells the lender whether you have the business acumen to survive volatility.

"We don't care that margins are shrinking. It's the fact that they are. Thinner profits are going to make you look riskier to banks. So make sure that you're making the appropriate moves as they're happening now and don't wait too long." — Shane Pearson

Shane's practical playbook for protecting margins:

Diversify your suppliers. Find sources in countries not hit with tariffs. Go to trade shows, industry conferences, and local associations. The days of relying on one country — especially China — for your supply chain are over. It is time-consuming and cost-prohibitive to start, but the alternative is getting buried when the next tariff announcement drops.

Buy in bulk before costs rise. An SBA loan could actually help here — if you can get the capital fast enough, buying inventory at pre-tariff prices creates an economies-of-scale cushion that protects your margins in the near future.

Lock in long-term contracts. Suppliers are watching the same news you are, so there will be pushback. But starting those negotiations now and building long-term partnerships through contracts stabilizes your costs and lets you predict your pricing adjustments with actual numbers.

Cut waste and fix your inventory management. Shane sees this constantly — small business owners tracking inventory on Excel files and napkins. Software that gives you real-time visibility into per-product profitability is not a luxury. It is the difference between knowing exactly where your margins stand and getting blindsided.

3. Raise Prices Strategically — Or Get Squeezed Out

Nobody wants to raise prices. But Shane is direct: if your costs went up 25 percent and your prices stayed the same, you are subsidizing the tariff out of your own pocket. That math does not work for long.

The key is how you raise them. Gradual increases are better than sudden jumps. If you hit customers with a 20 percent price hike overnight, sales plummet. If you sequence it up over weeks, you absorb some short-term margin pain but keep customer loyalty intact.

"Gradual price increases are better than just sudden jumps. Now is the time to start seeing a gradual increase in your price to prepare for that inevitability of tariffs." — Shane Pearson

Shane also recommends bundling products to make price increases feel like added value. The Amazon algorithm does this constantly — presenting bundles that encourage higher basket sizes while masking per-unit cost increases. Small businesses can apply the same logic.

And be transparent. Consumers are watching the same news. Everyone understands that imported goods cost more now. Explaining the why behind a price increase is not a sign of weakness — it is authenticity. Customers respect honesty far more than they respect a business that quietly jacks up prices and hopes nobody notices.

What This Means for SBA Borrowers

Shane's message to anyone considering an SBA loan right now is straightforward: if you're considering SBA financing, starting the process while your financials are strong may be advantageous. SBA loans offer some of the most favorable terms available to small businesses, but they take time to process. If you know you will need $400,000 to $5 million in the near future — whether for inventory, equipment, acquisition, or working capital — the time to start exploring is today, not after your margins have already taken the hit.

Show as much cash as you can on your tax return. Yes, you will pay the tax man. But that stronger financial picture gives you access to more capital on better terms, which is your best hedge against whatever volatility is coming next.

Shane issues a direct warning about the alternative: stay away from merchant cash advances unless it is your only option. The MCA death spiral — daily or weekly draws from your bank account at effective APRs of 30 to 40 percent — will solve a short-term problem while creating a long-term disaster. Private lenders offer faster approvals, but the cost is significantly higher and the repayment terms can crush your cash flow. Invoice factoring turns outstanding invoices into cash, but you are sacrificing 20 to 25 percent of the sale.

"Stay away from the high-interest merchant cash advance loans unless you absolutely need it. It will allow you to overcome a short-term problem, but it will create long-term problems. It's not a band-aid. It's a yoke that's put on your back that you now have to carry on top of running your damn business." — Shane Pearson

SBA Lending in 2026: What to Expect — Market trends and rate forecasts for small business borrowers navigating economic shifts
The Complete Guide to SBA 7(a) Loans — Everything you need to know about government-backed small business financing
SBA Deal Structuring Guide — How to structure your loan for the best outcome in any economic environment

Frequently Asked Questions

How do tariffs directly affect my ability to get an SBA loan?

Tariffs squeeze your profit margins, and lenders evaluate your loan application based on those margins. If your P&L shows shrinking profits year over year — even if the reason is tariff-related cost increases — you look riskier to the bank. Shane's advice: make margin-protecting moves now (diversify suppliers, adjust pricing, cut waste) so your financials still show a stable bottom line when you apply.

Should I apply for an SBA loan now or wait to see how tariffs play out?

If you're considering SBA financing, starting the process while your financials are strong may be advantageous. SBA loans offer some of the most favorable terms available to small businesses, but they take time to process. If you wait until your margins have already been damaged, your application will be weaker. Getting approved while your financials are still strong gives you the capital to buy inventory at current prices, invest in supplier diversification, or build cash reserves for what is coming.

What is the merchant cash advance death spiral?

Merchant cash advances provide fast capital but charge effective interest rates of 30 to 40 percent or higher, with daily or weekly automatic draws from your bank account. Shane has watched small business owners get trapped in a cycle: they take one MCA to solve a cash crunch, then need another to cover the first, and the compounding draws erode their organic cash flow until the business cannot sustain itself. The MCA is not a band-aid — it is a weight that gets heavier every week.

How can I raise prices without losing customers?

Three strategies from this episode: raise prices gradually rather than all at once, bundle products to add perceived value alongside the price increase, and be transparent with your customers about why costs are going up. Everyone is watching the same news. Authenticity builds trust, and trust keeps customers from walking out the door over a price adjustment they expected anyway.

What industries are most affected by the current tariffs?

Any business that relies on imported goods from tariff-affected countries — manufacturing, food service, retail, construction, auto repair, and e-commerce businesses sourcing from China, Mexico, or Canada. But the ripple effects hit everyone: when your suppliers' costs go up, those increases flow downstream regardless of your specific industry.

Ready to Protect Your Business from What Is Coming?

The Lords of Lending Training Platform teaches you how to structure deals, protect your margins, and position your business for SBA approval — even when the economy is working against you. Don't wait until margins are already compressed to start exploring your options.

Explore training options at learn.lordsoflending.com/pricing

This content is for educational purposes only and does not constitute legal, financial, or investment advice. Consult with a qualified attorney, CPA, and financial advisor before making business or financing decisions. Loan terms, rates, and programs are subject to change and vary by lender.