Why Economic Uncertainty is Worse Than Bad News for Small Business Owners

Uncertainty is a top challenge for small business owners—perhaps an even greater challenge than more definitive bad news. That’s because when businesses are unsure of what rules or standards apply to them, they can’t make plans for the future or operate normally.

When asked about the most significant challenges to their business’s future growth and survival, 59% of small business owners said “economic uncertainty“—a higher percentage than for any other category, according to a 2025 report by the National Small Business Association. Economic uncertainty outranked other challenges that included inflation, tariffs on foreign goods, supply chain delays and disruptions, lack of qualified workers, and regulatory burdens.

When the Rules Keep Changing, No One Can Play the Game

Uncertainty over business operations can stem from a range of places, including personal sources and government regulation, including rapid or unclear changes in tax or tariff policy. Uncertainty can lead to a type of business paralysis in ehivh small business owners forgo deals and postpone making key decisions.

President Donald Trump’s recent trade war has introduced that kind of hurdle for businesses. According to a Goldman Sachs survey, 38% of small business owners expect to feel negative impacts from tariffs, with 77% of those who report either current or anticipated negative tariff impacts citing uncertainty as the cause.

The Psychology of Business Paralysis

The logic of business paralysis boils down to anxiety felt by business owners and employees alike.

“There’s an element of anxiety that comes with feeling frozen and feeling like you’re not sure what the right path to choose is,” said Ben Johnston, chief operating officer of Kapitus, a provider of small business loans. “You need to know what the rules are in order to strategically plan for your business.

“The economy adapts to any rule that the government puts in place,” he said. “That’s really what small business owners, and quite frankly, what consumers are asking for, is clarity around what the future is, what the rules of engagement are, and what we need to do in order to be profitable and be prosperous.”

How Uncertainty Can Spur Opportunity

Although tariff uncertainty bears some blame for the 20-year low seen in merger and acquisition-based activity, Johnston has seen some pockets of deals thrive in the uncertain environment, and in some cases, the uncertainty has led to new business opportunities.

“I think everyone is examining their supply chain in a way that they had never really examined in detail before,” he said. “People are coming to us and saying, ‘Hey, I’ve got an opportunity. I’ve got a window here to buy goods that are affordable and try to get them in before the next round of tariffs. So I need to front-load some of my purchases, and I need working capital.’”

As such, Kapitus has been providing loans to small businesses that are seeking to tariff-proof their businesses. For example, one contractor importing lumber from Canada took out a loan to triple its imports before tariffs went into effect. Another small business, a wine importer from France, took out a six-figure loan to do something similar.

The Bottom Line

Economic uncertainty is a top challenge for small businesses, surpassing more concrete burdens like regulatory restrictions, natural disasters, and worker shortages. That’s because it’s hard for small business owners to make sound decisions when it’s unclear what’s looming on the horizon.