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Small businesses turn to lending startups as tariff costs mount

  //business-finance.news-articles.net/content/202 .. n-to-lending-startups-as-tariff-costs-mount.html
  Published in Business and Finance on Sunday, September 21st 2025 at 11:34 GMT by Seattle Times
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Small Businesses Pivot to Startup Lenders as Tariff‑Induced Costs Surge

In the wake of a sharp uptick in U.S. tariffs on imported goods, small merchants across the Pacific Northwest are turning to a new breed of financing—digital‑first lenders and lending startups—to keep their operations afloat. A feature in The Seattle Times traces how rising import prices are squeezing the margins of many local shops and how the traditional bank‑lending model is increasingly ill‑suited to meet their needs.

The Tariff Shockwave

The article opens by situating the problem: the Biden administration’s recent tariff increases on steel, aluminum, and a broad swath of electronics and components have added hundreds of thousands of dollars to the cost of inventory for small retailers and service providers. The piece notes that even a 10‑percent tariff hike on a $50,000 shipment of computer parts translates into a $5,000 extra burden that, for a small business, can be a deal‑breaker.

According to the piece, this inflationary pressure has amplified the risk profile of many small firms for traditional banks, which in the post‑COVID era have tightened lending criteria. “Banks are more cautious, they need stronger collateral and more robust credit histories,” the article reports, citing an unnamed small‑bank executive. The result is a liquidity gap that is forcing merchants to look elsewhere.

Fintech Lenders Step Into the Gap

The heart of the article is a deep dive into the fintech scene. The author highlights three major players that have seen significant growth: OnDeck, Kabbage (now part of American Express), and Fundbox. These firms offer rapid, data‑driven underwriting that can deliver working‑capital lines of credit in a matter of days—often within the same week of an application.

The Times article pulls in data from PitchBook and the Federal Reserve to show that, between 2020 and 2023, alternative lenders disbursed over $100 billion in loans to U.S. small businesses—an increase of nearly 40% over the previous year. The article underscores that this growth is not just about speed; fintech lenders also tend to accept a wider range of payment‑processing data, enabling them to consider businesses that have strong sales but weaker traditional credit metrics.

However, the article is cautious. It points out that the cost of borrowing from these firms is typically higher than bank rates. The average annual percentage rate (APR) for a small‑business line of credit from a fintech lender is often in the 12‑18% range, compared to the 5‑7% range that a well‑capitalized bank might offer. The Times’ piece cites a survey of 300 small business owners, revealing that 67% were willing to accept higher rates in exchange for the speed and flexibility fintech lenders provide.

Real‑World Voices

To ground the discussion, the article profiles two local businesses that have made the switch.

“Pacific Supply,” a Seattle‑based distributor of hardware and garden supplies, has seen its inventory costs climb by 15% since the tariffs went into effect. Owner Michael Chen explains that the company needed a $75,000 bridge loan to purchase a new shipment of imported tools. “We applied through OnDeck, and we had a decision within 48 hours,” Chen says. The loan, which carries a 14% APR, allowed Pacific Supply to restock shelves and avoid a potential backlog of orders.

On the other side of town, “Maple & Oak,” a boutique coffee shop in Bellevue, found the cost of importing premium beans higher than ever. Shop owner Lina Patel turned to Fundbox, securing a $25,000 revolving line at a 16% APR. Patel admits she was hesitant at first but ultimately valued the “no‑credit‑check” aspect, which gave her a quicker path to working capital.

Risks and Regulatory Oversight

The Times article does not shy away from the risks of predatory lending. It cites a recent Consumer Financial Protection Bureau (CFPB) warning that fintech lenders are sometimes less transparent about terms, leading to hidden fees and “rate‑increasing clauses” that can trap businesses in a cycle of debt. The piece urges small businesses to read the fine print and to shop around for the best terms, noting that some newer lenders are beginning to offer “rate‑lock” options for a limited period.

The article also touches on how regulators are beginning to monitor this market more closely. The CFPB’s 2023 “Guidance on Alternative Lending Practices” is referenced as a framework for lenders to disclose all fees and potential penalties. Small businesses are encouraged to use tools like the CFPB’s “Check Your Credit” portal to compare loan offers.

The Broader Trend

Wrapping up, the article positions the fintech surge as part of a larger structural shift in small‑business financing. It notes that even before tariffs, the COVID‑19 pandemic had accelerated the shift away from banks toward alternative lenders. Now, the tariff wave has amplified that trend. The piece points to future research by the Federal Reserve, which is exploring how the rapid growth of fintech might affect overall credit market stability.

In short, The Seattle Times paints a clear picture: small businesses, squeezed by tariff‑driven price hikes and a tightening bank lending environment, are increasingly looking to fintech lenders for quick, flexible capital. The trade‑off, however, is higher borrowing costs and the need for greater diligence on the part of borrowers. As the tariff landscape evolves, the article suggests that both lenders and regulators will have to keep pace to ensure that the growth of fintech translates into sustainable, fair access to capital for the nation’s most vulnerable businesses.