Small businesses adapt to inflation and access to capital pressures

Writer: Mirella Franzese

October 2025 — Small businesses contribute nearly half of the U.S. GDP, but in 3Q25 they were tested by significant barriers to growth. Inflation, tariffs, and a tight labor market have hindered expansion, while access to capital remains a major obstacle.

“Most small businesses fail for lack of capital,” Daniel Sheehan, president of Vista Bank, told Invest:.

According to the U.S. Chamber of Commerce’s Q3 2025 Small Business Index, inflation is the primary concern for 46% of small businesses. In the past year, 75% of small businesses said they were impacted by inflation, with many raising prices to offset higher costs.

In general, one in three U.S. firms is planning to increase prices by the end of the year as supplier costs and tariffs squeeze bottom lines. Among small businesses, twice as many (65%) are expected to hike prices, led by the retail sector.

A 2024 report by Boston Consulting Group noted that in an uncertain economy even the smallest price increases can discourage low-to-middle-income consumers from making discretionary purchases. For small businesses, which already tend to operate with slimmer profit margins, this could cause companies to close, Todd McCracken, president and CEO of the National Small Business Association advocacy group, told CNBC.

Beyond inflation and supply chain issues, small business owners are facing three core challenges: attracting talent, affording employee benefits, and revenue.

Nearly half of small business owners say they can’t find qualified applicants in the current labor market, according to NFIB’s 2025 Jobs Report. In addition to the lack of skilled workers, small enterprises are having to compete with larger employers on pay and benefits, as well as increase labor costs.

Access to capital is a big part of the equation, especially for corporations with less than 20 employees and in retail and service sectors. “Small businesses are the backbone of the U.S. economy,” said Rory Ritrievi, president and CEO of Mid Penn Bank, in an interview with Invest:. But he pointed out they “can’t get the financing they need from large institutions.”

Forty percent of small businesses are in debt of $100,000 or more, according to the Federal Reserve, but more than half cannot afford to take out a loan given current interest rates. At the same time, the number of small businesses seeking financing at big banks continues to decline — down from 44% in 2023 to 39% in 2024 — due to tighter credit requirements and growing dissatisfaction with lenders.

Community banks and smaller financial organizations like Georgia United Credit Union (GUCU) are doubling down on the small business segment, as a result.

“We focus on filling gaps that traditional banks often overlook,” said GUCU President Laura King to Invest: reporters. “While banks lean heavily on large commercial lending, we don’t … We’ve introduced products that big banks rarely offer to these groups.”

“For example, our high-earning savings account doesn’t require the typical $25,000 minimum. Members can open it with any amount and earn the full rate if they deposit at least $100 net each month,” she added.

King noted that many members wouldn’t have qualified for such products before expansion.

For Ritrievi, the relationship between small banks and small business owners could help stabilize the economy. “That relationship helped the country recover quickly after the 2007-2008 crisis. Whether starting, expanding, or transitioning ownership, (small businesses) rely on banks like us,” Ritrievi said.

In fact, small and midcap banks provide the majority of small business credit, according to Vista Bank’s Sheehan. Additionally, small business owners report easier access to capital than two years ago — a step in the right direction.

Despite concerns, the outlook for this quarter remains strong. The MetLife & U.S. Chamber of Commerce Small Business Index hit an all-time high of 72 — up from 65.2 last quarter — showing the resilience of small business owners amid economic whirlwinds.

“Small business owners are resilient,” said Ritrievi. “They make personal sacrifices and push through tough periods. Their dedication often drives the broader economy forward.”

Want more? Read the Invest: reports.