Small Businesses Turn to Risky Loans Amid Tariff-Driven Financial Strains

Many small businesses in the US are struggling to cope with increased operating costs due to President Donald Trump's tariff agenda, which went into effect last week. As a result, some have turned to risky financing options such as merchant cash advances (MCAs) to stay afloat.

The Federal Reserve's Small Business Credit Survey found that 12% of firms applied for MCAs in 2025, up from 9% in 2024. These loans allow lenders to front cash to businesses in exchange for a portion of their future sales, but come with steep costs.

Aharon Margolin, founder of Tariff Recovery Group, notes that the influx of MCA applications coincides with the launch of Trump's second-term tariffs in April 2025. 'It was pretty widespread,' he says, adding that businesses felt the pain directly due to higher import costs and reduced cash flow.

While MCAs offer quick financing without a credit check or collateralization, they can be expensive, with interest rates effectively ranging between 50% to 100%. Ami Kassar of Multifunding warns that these loans create debt traps, forcing borrowers into multiple rounds of refinancing and stacking.