Tariff Costs Are Squeezing Small Businesses. A Credit Line Can Bridge the Gap.

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In the Fed's 2025 Small Business Credit Survey, more than four in 10 firms called tariff costs a financial challenge. Retail and manufacturing firms reported it most often.

Tariff rules keep changing. On February 20, 2026, the Supreme Court ruled that IEEPA did not authorize certain tariffs. CBP is now processing refunds for eligible importers. See our tariff refund financing guide for how that works.

The mechanism creating that gap, and why a revolving line of credit addresses it better than a term loan, comes down to timing. Tariffs can create a cash flow gap of weeks to months. Businesses pay import costs on day one but may not collect revenue from finished goods until much later.

Why a Term Loan Is the Wrong Tool Here

Tariff exposure is not a one-time capital need. A business importing goods faces a recurring monthly obligation that fluctuates with shipment volume, tariff rate changes, and supply chain decisions. Drawing a fixed term loan to cover that exposure means paying interest on a lump sum whether the business needs it this month or not.

A business line of credit solves this differently. The operator draws only what is needed for the current shipment cycle and repays as receivables collect. Interest accrues on the outstanding balance, not on the full facility. For a $25,000 draw at an assumed 9% annual rate, interest runs about $188 per month.

Illustrative example, not a quote. Both figures assume a 9% annual rate and interest-only cost.

The Pre-Buy Strategy

Beyond bridging the import-to-revenue gap, a revolving line can support a second strategy: pre-buying inventory before a tariff increase. If a hike is announced with advance notice, operators with an available credit line may pull forward a few months of inventory at the lower rate.

Illustrative example, not a quote. Assume tariffs on a product category rise from 15% to 25%. Assume a business imports $50,000 of that inventory monthly. Pre-buying two months means a $100,000 draw and saves $10,000 in tariffs, before interest.

What Lenders Are Doing in Response

Tariff volatility has complicated underwriting for lenders trying to assess a business's future cash flow. When one policy announcement can shift a company's monthly costs, forward-looking income projections carry more uncertainty.

Some lenders may price that uncertainty into offer sizes and rates. Some operators could see smaller facilities or higher rates than their credit profile alone would suggest. For businesses with documented cash flow patterns and clear accounts receivable, the underwriting friction is lower. For businesses with irregular revenue cycles, the documentation burden has increased.

The Domestic Sourcing Shift and Its Credit Implications

Faced with unpredictable import costs, some small businesses may shift toward domestic sourcing. The trade-off is higher unit cost but more predictable cash flow, which lenders can underwrite more confidently. That shift, combined with a revolving credit facility, creates a more defensible financial structure than absorbing tariff volatility on an import-dependent supply chain.

For operators still sourcing internationally, the line of credit as a tariff buffer is a common tool. In the Fed survey, retail and manufacturing firms most often reported tariff cost challenges. See also tariff-driven credit demand.

Which Businesses Are Best Positioned

A revolving credit line works best as a tariff buffer when the business has documented, predictable receivables that close within the draw period. A retailer with net-30 accounts or a manufacturer with purchase orders in hand is a strong underwriting candidate. A business with lumpy, project-based revenue where collections stretch beyond 90 days faces higher carrying costs and more underwriting friction.

For operators who don't yet have an established line, starting the application process now, before the next tariff announcement creates urgency, is the straightforward call. Applications move faster when the business isn't already in a cash flow gap. Lenders may price a business with clean bank statements and stable revenue more favorably than the same business applying mid-crisis.