Even amid broad economic uncertainty due to the Trump administration’s global trade agenda, many small to medium-sized businesses (SMBs) in the United States are now feeling good about their near-term future. More than eight in 10 said in early June that they expect to still be in operation two years from now, the highest share since PYMNTS Intelligence began tracking business confidence just over three years ago. It’s a significant shift from only four months ago. In early February, when global tariffs were in the air but the April “Liberation Day” levies regime hadn’t yet unfolded, nearly one in five smaller businesses were pessimistic about their odds of survival. Nearly 7% said they might not make it. By early June, just 5.3% said it was likely they won’t survive.
But the newly rosier outlook isn’t spread evenly across all businesses. Much depends on a business’s size and industry. Construction and utilities firms, as well as independent retailers, are by and large seeing improved financial health. While the smallest and largest of SMBs are feeling more optimistic, mid-sized businesses (those with annual revenues between $150,000 and $1 million) saw a slight decrease in confidence in June compared to prior months. Hospitality businesses, including hotels and restaurants, are struggling the most.
A recent, small boost in consumer spending may have helped business outlooks.
The fresh data comes as consumers slightly boosted their spending in June by 0.3%, Bureau of Economic Analysis data shows. The increase, driven by slightly more purchases of food, beverages, apparel and recreational goods, came alongside an identical-sized uptick in disposable income. It seems that as consumers weather economic uncertainty and maintain their spending in certain categories, particularly essentials and discretionary items related to experiences and personal care, some SMBs are showing resilience amid widespread uncertainty about the economy and consumer spending.
More positive outlook notwithstanding, things are far from uniformly smooth sailing. Rising costs of imported goods, services and labor pose challenges, hurting some SMBs’ financial health.
These are just some of the findings detailed in “Small Business Growth Monitor Q2 2025: From Headwinds to Hope on Main Street,” a PYMNTS Intelligence exclusive report. This edition examines the current financial health of SMBs and their future expectations. It draws on insights from a survey of 513 SMBs conducted from June 2, 2025, to June 17, 2025.
SMBs Are More Optimistic Than Ever About Their Long-Term Survival
Small businesses are the backbone of the American economy, with nearly 35 million driving close to half (43.5%) of U.S. GDP, Small Business Administration data shows. As independent retailers, accounting firms, mom-and-pop restaurants, local construction firms and the like, so goes the nation’s financial health, making the sector a bellwether of consumer spending and economic growth.
SMBs are more optimistic about their future than they’ve been in three years. As of early June, the vast majority—82%—expected to be still operating two years from now. This marks the highest share on record since PYMNTS Intelligence began tracking SMB sentiment in July 2022. It is also a significant uptick from the 76% who said this in early February. Additionally, 12% now believe it is only somewhat likely that they will survive the next two years, compared to 17% in the February survey. Just 5.3% now say they are only slightly or not at all likely to survive, compared to 6.9% in the February survey. It seems that, for the time being, SMBs are feeling better about their prospects.
A significant component of the recent rise in confidence is the micro-SMB segment—businesses with $150,000 or less in annual revenue. Among these tiny companies, three in four say they are very or extremely likely to survive the next two years. While this share is smaller than that of larger SMBs, it marks a solid increase from 68% in both March and February. Among large SMBs with revenues exceeding $1 million, the confidence share held flat at 91%.
By contrast, medium-sized SMBs with revenues between $150,000 and $1 million saw a slight decrease in optimism. The share reporting high levels of confidence fell to 83% in June from 87% in March.
Growing Demand, Cost-Control Measures and Savvy Marketing Strategies Are Fueling SMBs’ Resilience
Bolstering this confidence, a range of variables is positively affecting SMBs’ performance, from exogenous factors to the strategic decisions companies have recently made about their operations. For SMBs of all sizes, increased customer demand is the most common positive contributor. All told, 40% of SMBs say they are seeing benefits from rising demand. Consumers have recently stated that they may reduce their purchases of certain goods and services if tariffs, many of which took effect on Aug. 7, drive up inflation. But they have also indicated that they plan to stick to some of their discretionary spending, particularly on household and lifestyle items, personal care products and extracurricular activities for children—areas where many small businesses, such as nail salons and summer camps, excel.
Other favorable factors include reduced operating costs and more effective marketing.
The largest SMBs (those with more than $1 million in annual revenue) are the most likely to benefit from introducing new products and services and from efficiency-boosting technology upgrades. The smallest firms (with annual revenues of less than $150,000) are more likely to cite more effective marketing or customer outreach.
In general, an SMB’s financial health is boosted by factors both within its control, such as internal technology upgrades and marketing, and outside its reins, such as the level of customer demand and improved supplier terms.
Despite Widespread Confidence, Micro-SMBs Are Facing Cost and Cash Flow Challenges
But while micro-SMBs are increasingly optimistic, a few are the most likely to be facing declining financial health. Specifically, 14% report being worse off financially than they were six months earlier. This percentage is double the share of high-revenue SMBs that said the same.
Construction and utilities businesses report being the most financially stable. Nearly two in three said in June that they’re doing better than they were six months ago. This share is 20% higher than the cross-industry average. Conversely, hospitality businesses such as hotels and restaurants are struggling the most. Nearly one in four is worse off than they were six months ago.
Rising costs for imported goods or for services, poor cash flow and late customer payments disproportionately affect micro-SMBs. Among firms with annual revenues less than $150,000, 38% say higher goods and service costs have negatively impacted them. This share is considerably higher than the three in 10 SMBs with revenues of more than $1 million that said the same. The gap may be due in part to smaller businesses having less negotiating power with suppliers favoring larger businesses. Additionally, 18% of micro-SMBs report being hurt by poor cash flow or late customer payments. This figure is twice the share of high-revenue SMBs that said the same.
Meanwhile, the largest SMBs are now the hardest hit by rising labor costs and by supply chain disruptions. According to the Bureau of Labor Statistics, wages and salaries in June were up 1% from three months prior. Nearly one in four SMBs are negatively impacted by labor cost inflation, vs. just 12% of micro-SMBs. Additionally, 15% are adversely affected by supply chain disruptions compared to just 8.6% of micro-SMBs.
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Methodology
“Small Business Growth Monitor Q2 2025: From Headwinds to Hope on Main Street” is based on a survey of 513 SMBs conducted from June 2, 2025, to June 17, 2025. The report examines the current financial health of SMBs and their future expectations. Our sample consisted of SMBs of varying sizes and industries: 27% of them generate annual revenues of more than $1 million and 36% revenues of less than $150,000. The sample included SMBs in retail (17%), construction (18%), hospitality (9.4%), professional services (11%) and consumer services (9.8%).
