The August Small Business Landscape Is Volatile

One word can sum up the business pulse for August: volatile. While tax cuts from the Big Beautiful Bill and a recovering GDP have boosted business confidence, a stagnantly-high Fed rate, crackdowns on the immigrant labor force and the looming threat of tariffs have economic sentiments in a cautious wobble.

What the small business environment is like for August

We’re rating this month’s business temperature as fair. While GDP is up and inflation is stabilizing, and the SBA is up in its approved loan amounts, a cooling job market and uncertainty around tariffs have put some businesses in a holding pattern.

Here’s a quick breakdown of the current business temperature. Read our full methodology.

So what now?

For small businesses, while uncertainty is the theme for the month, don’t let the volatility wear you down.

As such, here are some key business moves to make in August.

• Start working with your tax preparer. Tax cuts introduced in the Big Beautiful Bill will be taking effect for the 2025 tax year, so start taking advantage of them now.
• Stay on top of your import costs. With new tariffs taking effect in August, it’s crucial you stay ahead of potential price increases or shortages. Track which shipments are coming from tariffed countries and adjust accordingly.
• Consider taking advantage of SBA benefits. Both the Made in America initiative and the Center for Faith may offer extra business funding.
• Focus on workforce and supply efficiency. Both tariffs and immigration crackdowns are leading to inventory and workforce squeezes. Investing in efficiency through automation can pay off in the long run, even if you have to take out a working captial loan or otherwise.

Small business news you may have missed in July

Here’s the latest buzz on news you should be paying attention to.

Small-business employment remains steady through the first half of 2025, amid a stable national unemployment rate

TL;DR The national unemployment rate remains relatively low, while small firms with less than 50 employees have experienced very little change in their employment numbers. Education and health services sectors continue to grow, and small manufacturers also reported record numbers of employment growth in the month of June.

What does this mean for my business?

• Small-business employment is steady amid uncertainty. The Paychex Small-Business Employment Watch measured a jobs index of 99.65 in the month of June, representing a change of less than one point during the past twelve months. This caution could help your business retain its workers, even against a backdrop of tariffs and changing policies.
• The passage of the new tax bill may encourage more strategic investments. Frank Fiorille, Vice President of Risk and Compliance at Paychex, predicts a shift from this “wait and see” approach with the recent passage of the new tax bill, stating that business leaders may be more encouraged to start strategically investing in the future again.

Big Beautiful Bill Act introduces tax cuts and more

TL;DR: A wave of tax cuts can mean more dollars back in your pocket as a business owner – with some drawbacks on a larger economic scale.

Here’s a quick breakdown of the changes:

• No tax on tips or overtime. Tipped and overtime workers get up to a $25,000 deduction on tipped and up to a $12,500 deduction on overtime wages.
• Permanent pass-through deduction. Pass-through business owners get a 20 percent deduction on their qualified income.
• De minimis repealed. Import shipments under $800 will now be subject to tariffs.
• 100% bonus depreciation. Qualified business assets purchased or constructed after Jan 19, 2025 can have their depreciation deducted in the first year.
• More flexible R&D write-offs. Research and development expenses between Jan 1, 2022, and Jan 1, 2025, can be deducted over one or two years.

What does this mean for my business?

• You have more tax cuts to take advantage of. Talking to your tax professional can allow you to start taking advantage of the new tax rules to maximize your deductions.
• Your imported goods may become more expensive. The repealed de minimis rule means that commodities and shipments that were once exempt from tariffs will now be taxed.
• You’ll need to stay on top of tracking tipped wages. Workers will be the ones to take out the deduction on their wages, which means you’ll need to track tipped wages as usual.

New tariffs keep businesses on edge

TL;DR President Trump’s recently-announced slew of tariffs have businesses small and large preparing to hike prices. Trump placed reciprocal tariffs on several countries, including Canada and Brazil.

What does this mean for my business?

• Expect higher prices across the board. Tariffs are pushing up prices not only on imported goods, but on materials essential to construction and manufacturing.
• Stay in contact with your suppliers and diversify if needed. Being ready to change your supply chain when prices spike will keep you ahead of the curve and protect you from price shocks.
• So where you can manage price changes. See where you can cut operational costs or drop pricier, low-demand products, or introduce price changes gradually.

Fed rates remain high for the foreseeable future

TL;DR The federal funds rate is sitting at a stubborn 4.25 to 4.5 range, keeping the interest rate high on business loans as the Federal Reserve is waiting out a possibly turbulent economy. While the Fed is predicted to make a few cuts in the latter half of 2025, don’t expect to see rock-bottom rates any time soon.

What does this mean for my business?

• Loan rates will remain on the high side. Expect higher payments and fees for the foreseeable future.
• Reduce your debt level. Paying down your loans will reduce the amount of interest that accumulates on your balance, which can quickly accumulate if you miss a payment or rack up too much of a balance.
• Shop around for competitive rates. While rates are on the higher side, some lenders may offer lower rates for good credit and revenue. Refinancing for a lower rate can also help you save money.

Immigration crackdowns are adversely impacting many in the construction, food services and agriculture industries

TL;DR Businesses in the construction, food services and agriculture industries have experienced a negative impact from recent immigration crackdowns. Crackdowns have contributed to labor shortages and uncertainty in consumer behavior.

What does this mean for my business?

• Automate what you can. Ben Johnson, COO of Kapitus, a fintech business lender, suggests investing in automation software that can fill gaps in labor either temporarily or permanently.
• Be cautious about new ventures. Amidst labor shortages and uncertain markets, it’s important to exercise caution around any growth initiatives for your business, and possibly hold off until things are more stable.
• Reach out to financial advisors and business mentors. Your financial advisor or business mentors with whom you have a trusted relationship can also provide crucial counsel during uncertain times.

What’s happening with the SBA?

TL;DR Two recent developments with the SBA — the establishment of its Center for Faith and the recent Memorandum of Understanding (MOU) with the Department of Labor — open access to funding and other resources to businesses that may have previously experienced red tape around SBA help.

What does this mean for my business?

• Center for Faith. If you are a faith-based organization, you can now tap into resources offered by the SBA, including business counseling and capital.
• Made in America Initiative. Recent SBA activities can help small businesses that have ideas and determination, but lack early-stage support turn their potential into performance.

The bottom line

While inflation, a possibly cooling job market and volatility from tariffs and immigration crackdowns are making for a challenging business environment, now is the time to get your business finances in order and keep a steady head when planning for the rest of the year. By taking advantage of volatility and watching out for opportunities such as tax cuts and new SBA programs, you can come out ahead even in a challenging business environment.

Methodology

• Business temperature gauge methodology
  

  We at Bankrate strive for an objective analysis of the current small business environment, and fuel our Business Temperature Gauge with data that directly correlates with and indicates the current landscape for small businesses. We use a combination of data available from both government and non-government sources, all which we have vetted as trustworthy and truly reflective of our editorial standards.

  To calculate our business environment rating for each month, we consider the following factors:

  • National Federation of Independent Business (NFIB) Business Confidence Index: 15%
  • Federal funds rate: 20%
  • GDP: 10%
  • Inflation: 20%
  • Hiring rate: 15%
  • Monthly SBA Approved loans: 10%
  • SBA Approved loans amounts: 10%

  NFIB Business Confidence Index

  The NFIB Small Business Confidence Index looks at a variety of factors in its monthly survey, including inflation, the labor market, capital spending, credit markets and sales. We look at the NFIB Business Confidence Index within the range of 20-year highs and lows, using the most recent published score as input.

  Federal funds rate

  The prime rate set by the Federal Reserve directly impacts how much loans cost for small businesses, fuelling economic growth, investments, hiring and consumer activity. The current rate is scored based on 25-year historical highs and lows.

  GDP

  Gross domestic product growth is indicative of productivity and consumer sentiment, though the more localized nature of small businesses do not always strictly represent the larger GDP for the United States. We rate the national GDP based on target and forecasted GDP growth expectations for the United States.

  Inflation

  Inflation (and its inverse, deflation) disproportionately impacts small businesses, affecting both consumers and their spending power, and the ability for small business owners to maintain their profit margins in a more inelastic environment. Inflation is rated by the current rate’s proximity to the Federal Reserve’s target, which is 2% inflation.

  Hiring rate

  The hiring rate is reflective of the overall health of the economy, as well as consumer income that can be spent at small businesses. Our rating for the hiring rate is based on the number of net new jobs added each month as surveyed by the Bureau of Labor Statistics compared to projections based on economic and historical data.

  Monthly SBA approved loans

  The SBA releases the numbers for approved loans on a weekly basis for both 7(a) and 504 loans. Our rating is based on the six-month average of the combined number of SBA 7(a) and 504 loans and how the previous monthly amount differs.

  SBA approved loan amounts

  The SBA releases the combined dollar amounts of approved loans on a weekly basis for both 7(a) and 504 loans. Our rating is based on the six-month average of the combined SBA 7(a) and 504 funding totals and how the previous monthly amount differs.