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      What recession? US small-business sentiment jumps the most in 18 months
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      For Your Small Business January 26, 2026

      Small business tips for owners to navigate challenges in 2026

      Small businesses remain a key component of the U.S. economy, employing millions of people and responsible for well over half of net new job creation since 2013, according to the Bureau of Labor Statistics.1

      Small businesses are a source of innovation, and they provide critical parts and supplies to larger companies while acting as the backbone of much of the service economy. Small businesses also face many challenges today, including the difficulty in finding skilled labor, the uncertainty around federal policy and higher financing costs. Navigating these challenges will require a solid strategic plan that is flexible enough to accommodate the ever-changing landscape.

      Finding and keeping talent is top of mind

      Labor is often the biggest expense for small businesses, and the talent market remains tight in 2026. Natural population growth, or the difference between births and deaths, is very low in the U.S. and headed toward zero,2 and the population is aging as well. 

      Immigration formerly has helped keep population growth positive, but the likelihood of the U.S. experiencing net negative migration, with more people leaving the country than entering, is increasing in the light of current anti-immigration efforts by the current U.S. administration. As a result of these factors, labor may become more expensive and harder to find. 

      Automation and productivity gains can alleviate some of the issues, but aren’t complete solutions. Businesses of all sizes, but especially small businesses, will need a good strategy for acquiring, training and retaining workers.


      Trade policy brings pros and cons

      Tariffs have been levied on a variety of goods and countries. A potential positive effect of tariffs is that small businesses that are part of the supply chain, but don’t make finished goods, could find more opportunities to supply bigger companies domestically. Also, small businesses that make finished goods may be more competitive if competing foreign goods incur a tariff. 

      However, businesses may not be able to export as much as they have in the past if the dollar remains strong and other countries enact retaliatory tariffs, and some inputs may become more expensive due to tariffs and general inflation. Reshoring, retraining, and automation can help offset some of the effects of tariffs on supplies. 


      Focus on your finances

      Financing a small business has become more expensive over the last few years as both short- and long-term interest rates have risen. Interest rates may remain volatile throughout the year as the growth in inflation, deficits, and GDP all contain uncertainties. All of these areas will also be affected by fiscal policy, trade policy and deregulation. 

      One positive is that credit spreads can remain low if the economy remains strong. In addition, taxes may decrease (or at least not increase) and there may be more incentives for investment, which could boost growth in the short run. If tax cuts are not offset by spending reductions, however, U.S. federal debt will grow, which may cause interest rates and related borrowing costs to rise even further. 

      As a result, companies will need a good strategy around how they finance themselves. This strategy should address questions around short-term versus long-term debt, variable versus fixed-rate loans, and more.


      Find a partner to meet the challenges

      Managing a small business is never easy, but the current environment presents some unique challenges. For help developing your strategy, connect with an experienced financial partner who can help you overcome any obstacles ahead.

      References:
      1. https://www.bls.gov/opub/ted/2024/small-businesses-contributed-55-percent-of-the-total-net-job-creation-from-2013-to-2023.htm
      2. https://www.census.gov/newsroom/press-releases/2023/population-projections.html

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