Many American small businesses are grappling with higher operating costs as a result of President Donald Trump's tariff agenda, which he revamped last week with a new round of duties going into effect on July 24. Some are making risky financing bets as a result.
The Federal Reserve's annual Small Business Credit Survey released in March finds the share of firms applying for loans, lines of credit or cash advances — 38% in 2025 — has been largely unchanged over the last few years. But the share of those firms applying for merchant cash advances rose to 12% in 2025 from 9% in 2024.
Merchant cash advances, or MCAs, are financing agreements where lenders front cash to businesses in exchange for a portion of future sales. They can help businesses that need capital on a tight timeline, but there's typically a steep cost.
The uptick in MCA applications coincides with the launch of Trump's second-term tariffs, which went into effect in April 2025.
Aharon Margolin, who was working in the alternative financing industry at the time, says he saw an influx of businesses in various industries requesting financing — especially through merchant cash advances.
Even businesses that don't import goods faced rising costs, says Margolin.
It's understandable why some business owners turn to easy forms of credit. When small businesses run into a cash crunch, whether due to tariffs or rising operating costs or otherwise, sometimes they can't wait for a bank loan to clear.
Meanwhile, financing options like merchant cash advances can offer small businesses with tens of thousands of dollars in as little as 24 hours, often without a credit check or collateralization of other assets.
They may be easy to get, but that doesn't make them advisable.
Oftentimes, these loans create debt traps that force the borrower into multiple rounds of refinancing and stacking, and they get more and more complicated.
Tariffs may be contributing to the rise in merchant cash advance applications. Over 40% of firms said increased costs associated with tariffs were a "financial challenge," the Fed's survey found.
Margolin can't confirm his Tariff Recovery Group clients have used refund money to pay off MCA debt specifically, but he says business owners have been incredibly relieved when the funds come through.
