Page 30 - GS250501

g
hts
and
Insi ChapterTitleExpertise

Turbulent financial Even now, during the early stages of market uncertainty
caused by tariffs, some smaller businesses have stated that
markets limit financing they are teetering on the edge of failure.
Many small businesses import their goods solely from
for businesses China, since it is prohibitively expensive attempting to get
products from the United States.

If the current tariffs stick (they might have gone up or
down in the time it has taken me to write this article to
this point), then their import price will have effectively
multiplied several times.

According to a recent BBC News article, a small business
that makes sauces in the United States is considering clos-
ing up shop, since the only way the owners of the business
can can get their spices is from India (the spices they need
cannot grow in the United States), and if Indian imports
become subject to a large tariff, the businesses will be
forced to sell products at a price the end-consumer won't
be happy to pay.

It isn’t just businesses that import goods that will be di-
rectly impacted, either. Nearly every product-based busi-
By Chad Otar ness will see costs rise because somewhere along the line
Lending Valley imported products will be used.

s this article goes to press, U.S. tariff policies So costs will go up across the board, and there will be less
have been shifting rapidly, with import duties money for people to spend. And less money for people to
on goods from China escalating to 145 per- spend will cause many, many businesses to crumble.
A cent—up from 125 percent just the day before.
Earlier, across-the-board tariffs of at least 10 percent were Let’s be honest, if you were a financier, would you want to
announced for nearly all trading partners, with many loan cash to, or invest in, businesses that could have their
rates rising much higher. These developments, alongside entire income wiped out almost overnight? Probably not.
temporary pauses for some tariffs, highlight the volatility The markets will need to settle first, and I don’t see that
businesses now face when managing global supply chains. happening soon.
What businesses can do to find potential funding
Such unpredictability has rattled financial markets, creat-
ing waves of sharp gains followed by steep declines. This This is where things become a bit complex because, as I
environment of uncertainty can make it increasingly dif- mentioned, the majority of businesses depend on imports
ficult for businesses to secure the financing they need to somewhere along the line. Even when a business does not
sustain operations and growth. realize imports are required for it to function, imports fac-
tor in somewhere in its supply chain. I doubt many prod-
In this article, I'll be talking from a purely U.S.-business ucts are made with 100 percent U.S. resources. Take the
perspective. I can imagine that businesses located over- agricultural industry: while numerous food products may
seas, and not dealing only with the United States, may be grown in the United States, farmers require imports
have an easier time obtaining financing, since things are from Canada to sustain their crops.
a little bit more stable in many other locales. However, if
this market turmoil throws us into a recession, then things
may become a lot harder for everybody worldwide.

Why business financing may become more difficult Even now, during the early stages
of market uncertainty caused
Those who finance companies rarely do it from the good-
ness of their hearts. They want to know that they'll get by tariffs, some smaller
their money back. The only way they can do this is if a businesses have stated that
business continues to generate cash. They earn nothing
from businesses that close down. Lenders can attempt to they are teetering on
recover money from a failing business, but meaningful re- the edge of failure.
turns are virtually impossible. It just doesn't happen.
30