Interest rates have been climbing since 2022 as part of the Federal Reserve’s efforts to combat inflation. While inflation is starting to cool, the financial pressure remains high for SMBs. According to Goldman Sachs, smaller businesses are often more vulnerable to interest rate hikes because they typically pay higher rates than large corporations—about 10.5% compared to 6.5%. These higher costs can cut into profit margins, making it harder for businesses to reinvest and grow.

Despite these challenges, SMBs are finding ways to stay strong. As highlighted in Forbes, 69% of small-business owners now rely on personal savings to finance their business, reflecting the need for alternative funding solutions. However, relying solely on personal savings can pose long-term risks, so exploring flexible funding options is critical.

One key strategy is diversifying funding sources. As access to traditional bank loans becomes more difficult due to tighter credit and rising interest rates, SMBs are exploring alternatives such as B2B pay-later solutions, AR factoring, purchase order financing, etc. These “alternative financing solutions” have gained popularity because they offer better availability and flexibility than traditional bank loans, and often come with easier and more streamlined online processes.

For example, Havri B. Vartanian, CEO of KC Global Networks, chose to avoid traditional loans, instead opting for BlueX Pay-it-Later and Get-Paid-Faster to support his business. BlueX By seeking alternative financing options, SMBs can avoid the strain of high-interest loans and continue investing in their growth.

Effective cash flow management is essential for SMBs to weather financial pressures. Cash flow problems can arise when businesses have to pay vendors before receiving payment from customers. That’s where innovative financial tools like BlueX Trade’s Pay-it-Later and Get-Paid-Faster can help:

• Pay-it-Later: This option allows SMBs to access up to $1 million for freight and cargo invoices. BlueX pays their vendor, giving them an extra 30-60 days to repay. SMBs can choose the repayment terms with each transaction.
• Get-Paid-Faster: This solution enables SMBs to get up to 80% of the receivables within the next business day, so they don’t have to wait for their customers’ payments.

These tools provide flexibility and breathing room, allowing SMBs to manage day-to-day operations without cash flow disruptions.

While rising costs can make it harder to invest in growth, it’s essential for businesses to continue making strategic investments. According to Goldman Sachs Research, many SMBs have built up a financial surplus—estimated at 2.5% of US GDP—giving them a cushion to finance growth initiatives. Even with tighter budgets, businesses should prioritize areas that generate long-term returns, such as technology, digital transformation, and customer acquisition.

While rising interest rates, inflation, and higher costs pose challenges for SMBs, they also present opportunities for businesses to rethink their financial strategies. By diversifying funding sources, managing cash flow effectively, and making strategic investments, SMBs can navigate these pressures successfully.

Products like BlueX Trade’s Pay-it-Later and Get-Paid-Faster provide valuable tools to manage cash flow and avoid high-interest loans, giving businesses the flexibility they need to thrive. By embracing these solutions, SMBs can continue to grow, even in today’s challenging economic environment.