Decision-Making in the Economic Fog: Making Capital Decisions in 2025
- Tzortzis Capital
- Jul 31
- 3 min read
In mid‑2025, many small and mid‑market businesses find themselves operating amid what analysts are calling an “economic fog.” Volatility persists, credit remains tight, and costs have not fully normalized. Yet, for those willing to act decisively, opportunities still exist for quiet—yet meaningful—growth.
1. Rising Demand Amid Restrictive Credit
According to a 2025 Small Business Credit Survey, demand for capital is up sharply, but approval rates from traditional banks and SBA lenders are down. Lenders now require stronger credit scores, collateral, and financial histories. As a result, many businesses turn to merchant cash advances and online lenders—despite their typically higher cost structures.
At the same time, persistently high interest rates and cost of borrowing in 2025 have led businesses to explore alternative terms like factoring or fixed‑rate equipment financing.
2. Inflation Pressure and Supply Chain Fragility
Although inflation has cooled from earlier peaks, costs for labor, raw materials, rent, and shipping remain elevated. Many businesses struggle to pass on these costs fully, squeezing margins and keeping cash flow tight. Some are renegotiating supplier contracts, embracing cost review programs, or bifurcating deals to align payments with revenues.
Likewise, supply chain disruptions—driven by geopolitical friction or tariff uncertainty—continue to introduce volatility in pricing and delivery schedules. Businesses are increasingly diversifying vendor pools and employing just‑in‑time financing or purchase‑order financing to ease payment burdens.
3. Strategic Moves: Building Clarity Where You Can
Even as broader uncertainty remains, capital demand from mid‑market industrial firms rose nearly 95% year-over-year in early 2025—evidence that parts of the market continue expanding.
Businesses that succeed are often those that lean into clarity at a manageable scale: running lean expansions, investing in targeted equipment, and locking in financing where terms are still favorable.
4. Policy Headwinds and Regulatory Complexity
Changes to wage laws, tax policy shifts, and inflation‑adjusted regulations are raising compliance costs for many firms. Staying informed—and working with trusted advisors—is no longer discretionary; it's essential to avoid surprises.
There’s also the looming risk of stagflation. Analysts now assign a modest (~25%) probability of a U.S. recession over the next 12 months. At the same time, inflation forecasts remain elevated, feeding into prolonged high interest rate cycles.
5. Opportunities in Alternative Capital and Innovation Tools
With traditional financing harder to secure, businesses are exploring a range of alternatives: crowdfunding, community development financial institutions (CDFIs), invoice factoring, micro‑loans, and peer‑to‑peer lending. While often more expensive than bank loans, they fill critical gaps in working capital or short‑term needs.
Conclusion: Balancing Realism with Momentum
Yes, 2025 feels like fog: interest rates stay elevated, inflation lingers in core costs, lending standards have tightened, and economic risk (including mild stagflation) looms. But within it, parts of the capital market are growing.
Many businesses continue accessing equipment finance, invoice factoring, CDFI loans, and targeted expansions—even in industrial or retail niches.
So what should business leaders do?
Clarify: Identify areas where small, strategic investment can yield tangible returns—such as upgrading equipment or automating workflows.
Diversify: Don’t rely solely on one source of funding. Tap into alternative channels—even if short‑term costs are higher.
Control costs: Regularly revisit supplier contracts, renegotiate terms, and optimize cash flow before capital pressure mounts.
Stay informed: Follow evolving policy, tax, and wage regulations closely. Use trusted advisors to navigate changes.
Plan for volatility: Assume rates stay elevated in the medium term. Structure borrowing in fixed‑rate or hedged instruments whenever possible.
While the macroeconomic picture may be cloudy, businesses that build clarity incrementally, diversify intelligently, and act decisively in areas they can control will not just endure—they may quietly expand.
At Tzortzis Capital, we understand navigating uncertain capital conditions in 2025. Reach out—we’re here to help you turn that fog into focus.
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