Shane Pierson: Welcome to the Lords of Lending Podcast, where we cut through the noise and give you real talk about business, money, and a financial system that either is working for you or against you. So if you’re a business owner, entrepreneur, a broker, or just someone that wants to understand how the game is played, you’re in the right place.

Because here, we don’t just talk about lending, we talk about power, wealth, and how to really build something that lasts.

I’m Shane Pearson, and I’ve spent nearly 20 years helping small business owners get access to the capital that they need to buy a business, scale, and And honestly, build real wealth. I’ve seen every kind of deal. Good ones, bad ones. Some that should never have been approved. And there’s those that should have been approved.

That I had to put up a fight for. So my job is really making sure that business owners don’t just survive, but they thrive. And I do that by being brutally honest and cutting through the nonsense. And really making sure that you have the right information at the right time. So I’m not here to sugar coat anything.

Business is tough. The lending world is tough. But that’s honestly why we’re here, whether you’re trying to buy a business, refinance debt, or just figure out what the hell is actually happening in the economy, Lords of Lending is the inside track to understanding how the financial world really works.

So this isn’t just another podcast about banking or business loans, because that’ll just bore the hell out of us. Nope, we’re going, honestly, we’re going to go a lot deeper.

So on future episodes, you’ll get to hear from the other Lords of Lending, my co hosts, and industry leaders as we break down the real challenges that business owners face today. We’ll be covering fringe topics that actually affect small businesses, from AI replacing bankers to government trade wars.

We’ll be discussing how to leverage the financial system to build real, lasting wealth. We’ll also get into the truth about SBA loans, alternative financing, and what the lenders really look at when they approve or deny your deal. Lastly, we’ll be touching on those untold stories of entrepreneurs who actually win big, some of which we’ve helped, some of which some of our colleagues have helped at other and other institutions, and some that might have lost everything.

So we’ll have guests debates and straight up unfiltered conversations about what’s really going on in the business world So if you want hype really go somewhere else if you want the truth and more importantly how to use it to win stick with us

Hit that subscribe button follow us and don’t miss a single episode because in business

So welcome to Lords of Lending, let’s get to work

On today’s episode, we’re going to discuss the more commonly reported on tariffs and how those might impact your business. You ever wake up, check your email, and suddenly the cost of everything your business relies on just went up.

No warning. No heads up. Hey, by the way, everything costs 25 percent more now. Good luck. That’s what tariffs do, to small businesses.

There are taxes on imported goods. And while big corporations can absorb those costs, those mom and pop businesses, they honestly get wrecked. And so today I really want to break down how these new tariffs will impact your industry, what you can do to avoid the financial squeeze, and if you need a loan, what lenders are looking for so you don’t get caught off guard.

So there’s not going to be any fluff. Let’s just go ahead and get into it.

All right. So what the hell just happened with Trump putting in a 25 percent tariff on goods from both Canada and from Mexico. So these let’s go let’s go through it. So terrorists equal taxes on imports The government slaps them on goods from certain countries to push domestic production That’s to try to get us to do a whole lot more here in the US and and really put a squeeze on anybody else It’s importing to prevent them from kind of dominating those industries and really could be a control tactic For for anyone any small business owners are really consumers in the United States So in theory, it sounds great to do that in hopes that we’ll try to drive more production here in the U. S.

But in reality, the small businesses take the first punch to the face. So an example would be like 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.

So really, they’re going to get hurt. And they honestly won’t be able to raise their prices fast enough to get consumers to try to make up for the loss on all the existing steel that they already had. So it’s this, I see this a lot in the gas station industry as prices of commodities go up and down in the U. S.

Gasoline in particular is one that tends to follow that. And then a gas station owner will have to be raising its prices the moment they hear that it happens. Even though their last batch of inventory that they just bought was maybe 25 cents cheaper. The next time they try to go buy gas from all the income they just made from selling this last week, it’s all of a sudden going to be that much higher.

So if they don’t, if they aren’t able to manage their cost margins consistently on a day to day basis, it will squeeze them out to the point where they’re not going to have enough capital just to fill up those tanks that are underneath the ground. So you can kind of see how this would correlate to somebody who uses raw materials, or really that has any type of reliance on imports, that their margins start to get squeezed as those happen, and with that type of a rapid increase, Like I said, most small mom and pop businesses don’t really have the capacity to absorb that kind of a hit.

It will, it will take its toll on the, on both the balance sheet where your cash sits, but really on your just long term profitability until things gradually turn over within the economy locally. The reality is that the U. S. doesn’t manufacture everything that we need, so when tariffs hit, we’re all gonna feel it.

So the idea is to understand where you’re going to feel that, that pain, that pain first. So let’s discuss where you’ll feel that pain first. I’ll identify quite a few of these points here. Material costs. So if you buy imported goods, like we just talked about steel, textiles, food ingredients, expect those costs to rise.

The next might be supply chain delays. Any of those suppliers that are shipping that inventory in. Are going to have to hold it a little longer just to try to see if they can get costs to stabilize. So we might go back to that COVID era slowdown where you saw things at the imports, or things at any of those ports really getting held up, or honestly them never hitting the ships in the first place.

Next will be customer pushback. That’s where I know I’m going to feel the pain on my morning sodas, or really anything else that I have to go get on a daily basis, the groceries. There’s plenty of groceries that we see every day that are imported from Mexico or Canada, specifically Mexico, that will go up overnight.

And so it will begin to feel the pressure, will begin to feel the pain as consumers, small business owners are going to have to kind of suffer the slowdown in the affordability of their customers to actually buy their products. The next that is one that touches me is the loan approval risk. So lower profit margins, pretty simple math, lower profit margins make lenders a whole lot more nervous.

That means it’s going to be that much harder if you have a reliance on those imported goods or those imported costs, um, hitting your, hitting your profit and loss. That’s going to make it harder for you to qualify because ergo you’re not showing enough income at the bottom line.

The next point I want to get into is how to protect your business from these tariff fallouts.

First. Diversify your suppliers. It’s easier said than done. We all know that you, you know that you only have so many options. And if you’re a person that really is only getting, if you’re a small business owner, that’s really only getting a product for one supplier. This is going to be a lot harder move, time consuming and very cost prohibitive to really help you be something you can get a hold of.

But if you haven’t already started doing that, now’s the time to start looking into it. Find those suppliers in countries that aren’t hit with the tariffs. This is, uh, I believe this is probably a goal from Trump himself to try to diversify on who our partners are that are importing goods so that we don’t become overly reliant on, on one source.

Small business owners got to follow suit with that. We have to take the time to look for suppliers, look for other people that could produce it. And you might actually find somebody that can get it here cheaper for you. Actually helping your, your profit margins. I think everyone has really relied on China as a source for for most of their goods because of that low cost of production, the low cost of like wholesale supply for you to go out and sell whether an e commerce business or really anybody that just needs any of those products in the services that you might provide.

It’s time to really expand our horizons for that and going to local trade shows are going to larger conferences that are specific to your niche in your industry. Can help provide opportunities for you to to find those suppliers because that’s that tends to be where you can find the the the different customers that are out there that you need to build that face to face relationship with not everybody can get on a plane and Fly to taiwan overnight to try to get a better price than what they got in china Not anyone can can fly to brazil to go see if there’s somebody down there that can help you besides what’s happening in mexico so Look, look around for those trade associations, look for ways that you can, you can, uh, reach out to, to different suppliers and that’ll help you to, to overcome some of the, some of the risk of really just being stuck with, with one source that just gets hit with that tariff.

The next is, is something we all hate. And if you’re a big guy like myself, it takes a hell of a lot of work to trim down Well small businesses that are a bit beloaded with expenses I think go through a similar pain which is you got to go really cut down and try to get lean on your costs So the a couple different ways you can think about doing this if you’re a small business owner is to go buy in bulk before those costs rise A loan could actually help you do this if you can get the capital quick enough You may be able to go to your suppliers and buy in bulk, which creates an economies of scale situation to drop the cost overall of each product that will then allow you to reap more profit in the near future.

And that will help offset some of the future costs that are about to about to hit your wallet. Next would be to lock in long term contracts. This you might get some pushback from on suppliers because unless they’re living in a hole, everyone’s kind of watching the same future of the impact that it might have on them.

But starting those negotiation now and negotiations now and looking for ways to to build a long term partnership with those suppliers in the form of a contract will help help you stabilize costs a bit more and be able to predict what you need to do on the front end on your whether you’re providing a service or whether you’re providing a product for sale to to adjust prices to offset that and make sure your profit margins are stabilized.

Last is really to cut waste. And like review your inventory management a lot of a lot of small business owners I see don’t have very good Inventory management. They don’t spend enough time Doing that the daily inventory counts or they are Not using software to its fullest. I mean plenty are still using excel files and napkins to do this But it’s worth looking into ways to automate inventory management and also ways to To institute software that can can help you keep that world organized so that at any given point in time you can go look at your books and know exactly the profit that you’re making on that on a single product or service that you might be offering without that you’re really putting yourself at high risk that you know that you’ll blow back up and be taken out by some of these tariffs as they come through.

Next would be the pricing game. How to raise your prices without losing customers. There’s various ways to do this regard, you know, regarding each industry that you might be working out of, but gradual price increases are better than just sudden jumps. So now is the time to start seeing a gradual increase in your price to prepare for that inevitability of tariffs.

If you have that reliance on a supplier, that will have tariffs imposed on them.

Next thing we can think about is the pricing game. So really how you can raise prices without losing any of those customers. So a couple of different points I can make for you to help manage. This is to gradually increase your prices.

Because it’s a lot better than those sudden jumps in prices that you might You might put on your customer that will see sales plummet immediately. So if you have to offset that, it might cause a little bit of a drain on cash. But if you can set up a profile that allows it to kind of sequence its way up, that will help to avoid the sudden impact on the consumer and not lose that customer loyalty if you have a product that’s continually purchased or a service that you have to provide that relies on that inventory base.

Another option you can do is bundle products and make it so that price, the price hikes feel like kind of an added value. I don’t think this gets utilized very often. You see the Amazon algorithm kind of pre present that to you if you’re on the consumer side, where they’ll try to get people to, to buy multiple things, but that, that added value of bulking in multiple products that kind of feed off one another will give you that extra cushion to to layer in that added cost increase.

So don’t be afraid to, to buff that up by finding more convenient ways or more creative ways to service your customers.

Lastly, is really transparency. I think consumers get it. We’re all watching the same news programs. So you can, you can take the time to explain this to your customers. You can put it in the narrative, in the description for the business. Depending on how and where you’re selling this, this transparency.

Makes it a lot easier to absorb because not even so much to build off of empathy for you and what it’s happening We we just all kind of get it and it is it is what it is Anybody who’s selling a similar product or service that has that same reliance is going to be selling for us We’ll have to make the same price adjustment.

Otherwise, they’re going to go under so it’s it’s worth it’s worth being transparent with your customers and being real and I think that that authenticity will We’ll help to to keep somebody from just walking out the door the moment they see a larger price

Okay, let’s get into how tariffs actually affect your ability to get a loan This is something that I think is easy kind of easy math for anybody that is on my side of the equation to be able to see what what all of this will do to our ability to get a loan for you.

Shane Pierson: So banks, they’re not watching your margins are banks. Sorry. Banks are watching your margins. And that’s kind of the problem. So we’ll we’ll spread out your financials year over year and we’ll see what’s happening. Granted we’ll have the excuse there to understand what caused the impact on it But we need to see a smart business decision on the other side of that Of really what you’ve done in your business to try to offset it It kind of shows your business acumen and and shows the knowledge and strength that you have as as And control that you have of your business that that would help put some comfort into our hearts as as When we’re trying to approve the loan and whether or not we want to come be a partner in your business in the form of debt so that we really We don’t care that they’re shrinking It’s just the fact that they are so thinner profits are really going to just make you look riskier to banks So if if they hurt your bottom line You’re going to see us hesitate So make sure that you’re making the appropriate moves as they’re happening now and don’t wait too long to do that So we can still see a stable bottom line So the question will come up when an underwriter is reviewing your your your financials at any point of what’s going on We know the answer that you’ll give, but it’s really, how did you adapt to that?

That, that explanation I think will really help increase your chances of, of understanding the, the projected strength of your business going forward. Know this, that cashflow is king and how to keep your strong requires just a little extra thought. So we’ll look at stability and those tariffs are creating that uncertainty.

Keep strong cash reserves. And steady revenue I know it’s easier said than done But whatever you can do the micro budgeting whatever needs to happen on your business side to try to pull up cash reserves Will help you avoid making poor decisions, but by going out and getting fast cash From mca debts other short term business lenders that are really taking advantage of most small businesses these days That will put you into this death spiral that you’ll hear us talk about in future episodes Cut unnecessary expenses before applying for the loan.

I think it this could also fall back onto overhead when it comes to the people you have on staff. Sometimes we hold on to employees a little too long in hopes that that they’ll perform eventually. HR impact of letting some go. But if you can build simple metrics to try to cut. Uh, to be able to make those decisions quickly when those moments arise that you need to eliminate somebody from your staff.

This will help to, to have better control of your bottom line to keep your business alive. Therein, adapting to the, the cost increase that you know is inevitably coming. So I keep trying to pull it, we’ll keep trying to pull it back into tariffs to help you understand that these, these moves are also a great decision just generally for, for helping your business survive.

But we want to make, make you adaptable to, to what’s coming on the tariff side and the impact that, that, that’s going to have on your business.

There is some alternative financing that exists in the small business lending world. And I just err on the side of caution when moving forward with this. So SBA loans are government backed, so they’re going to have more flexible terms, but they take a little bit longer to get going with.

If you need to get capital and you know that you’re going to need four or five hundred thousand dollars in the near future or even up to five million as you were in the SBA program, get applying now. Now is the time to show as much cash as you can on your tax return. You might have to pay the tax man, but that will give you access to more capital now to hopefully offset what the future might hold, whether it’s interest rate increases or decreases, whether it’s in some of the volatility that exists there.

Whether those tariffs actually land on your supplier or not. Applying for a loan now on, on, on what I feel are the best terms for your business with an SBA loan, will help to mitigate a lot of the risk that comes along with the volatility that we’re all expecting. There are some private lenders out there.

They’ll give you faster approvals, but the costs are significantly higher. You gotta read the small print when talking to any of these lenders. You have to understand what really the repayment terms are, how long you have to pay that money back, because some of them are so accelerated that they’ll take a draw out of your bank account daily or weekly and a number that you may not really understand the impact that’s going to have.

Take time to do the math before you just take on any debt. Now is the time to really focus in on, on understanding your financials. Hell, go take a course at a community college about on accounting, whatever you need to do to educate yourself to help overcome those particular problems and then use that when going to apply for, for loans, regardless whether it’s SBA or private financing.

There’s also the invoice factoring. This, this really turns outstanding invoices that you might be getting into cash, but figure you’re only going to get 80, 75 percent of that sale. So if you have somebody that you’re used to getting paid 30, 60, 90 days out, and you wanted to go factor that debt, that loan could be used to get you cash now, but you’re sacrificing some serious profit margin on the back end of it.

So just understand before you’re getting into factoring, what the long term impact is going to be of you rolling that forward by them taking that much profit off the top of your, of your business. So really stay away from high interest cash advances, unless it’s your only option.

here’s a warning that I continue to tell every customer that comes to my door. Any small business owner that I talk to is stay away from the high interest merchant cash advance loans unless you absolutely need it. There are plenty of sources out there that are selling this and they’re selling it hard to small businesses. It, it will allow you to overcome a short term problem or short term issue, but it will create long term problems if not managed appropriately. And most of the small business owners that I see haven’t figured that out. They don’t understand the impact and unfortunately it puts them into this merchant cash advance death spiral is what we, we in the lending world have been calling it lately.

It really puts you into this death spiral that stops your business from. Being able to see the organic cashflow that you might have been used to in the past. It’s not a band aid. It’s it’s if anything, it’s a yoke yoke that’s put on your back that you now have to carry on top of running your damn business.

So put some effort into making sure you understand what you’re getting into before you get in bed with the merchant cash advance company of any sort.

So in the end, just understand that terrorists aren’t going away. I’m they’re going to be here. Trump’s here and he’s using it as a tool to To try to manage the what’s happening in the U. S. And the direction of the country not going to get into the politics of what happens there. But I really want you to think about what your next move is going to be.

We have to pay attention to these to these policy changes and what they’re going to do to you. And if you’re if you’re in the dark, not watching the news, not paying attention, you’re going to get buried. You just don’t wait for the surprise. It’s something that will come up and have a huge impact on you begin to prepare your business.

You can’t just sit there and complain and do nothing. You have to adapt and get smarter. So the businesses that pivot will survive those that don’t history tells us what happens to those guys. So if you’re already feeling the impact of impacts of tariffs, perhaps the suppliers are already started tacking on that fee in anticipation of what’s going on to try to reap a future or to try to reap cash now to offset their future costs.

Are you already feeling the impact of tariffs on your business? Have you already had to change suppliers, raise prices, or struggle with financing? Let’s talk. Drop a comment, message us, and let’s figure this out together. Because honestly, small business owners don’t just sit back and let the economy dictate their future.

Thank you. We adapt, we pivot, and we on, we find a way to win. If you’re an entrepreneur, you, you have that scrappy element that will help you succeed. You just gotta dig down, find it, put it into effect, and use that scrappiness to overcome these, these obstacles that are rolling at you. Just dodge ’em for heaven’s sake. Thanks again for, for tuning into the Lords of Lending podcast. I’m your host, Shane Pearson. So go ahead and hit that subscribe button and follow us and do your best to not miss a single episode. Thanks and go get it.