Optimism Rises Among Small Businesses Despite Persistent Financial Pressures

Many small- to medium-sized businesses (SMBs) are looking past the trade-driven uncertainty dominating national headlines and are instead showing a level of confidence not seen in more than three years.

The PYMNTS Intelligence report “Small Business Growth Monitor Q2 2025: From Headwinds to Hope on Main Street” suggested that the most meaningful movement is not in the largest or youngest firms, but in the smallest operators whose outlook has shifted more than expected.

The report analyzed how firms across revenue tiers and industries are adapting to rising costs, shifting consumer habits and tariff-related pressures. Based on surveys conducted in early June, the study found that overall expectations for long-term survival have strengthened compared with earlier in the year.

At the same time, the findings showed a more textured picture of Main Street’s economic footing. Industry type, business size and operational costs all influence whether a firm is gaining or losing ground. The report tracked the momentum that is building across several sectors and the vulnerabilities that remain.

Key findings include:

SMBs are optimistic, as 82% of them expect to be operating two years from now, the highest share recorded since tracking began in mid-2022. This compares with 76% who shared the same outlook in February.

Rising customer demand is the most common positive driver of performance, cited by 40% of SMBs. This is supported by modest increases in consumer spending in June on categories such as apparel, recreation and personal care.

Rising goods and service costs are hurting the financial health of 38% of micro-SMBs with annual revenue under $150,000, a significantly higher share than the 30% of high-revenue SMBs affected by the same pressures.

Other findings in the report added depth to the story of rising confidence. The smallest firms continue to feel squeezed by higher input expenses and uneven cash flow. Fourteen percent said their financial health deteriorated over the prior six months. Late customer payments and weak liquidity weigh more heavily on these firms than on larger peers with more stable revenue streams. At the same time, many are adapting by leaning on sharper marketing tactics and closer customer outreach, actions that appear to support their more positive outlook.

Large SMBs, those earning more than $1 million annually, show confidence levels at 91%. Their performance is more likely to benefit from technology upgrades and the rollout of new products and services. Yet they face distinct headwinds, particularly the rising cost of labor. Nearly 1 in 4 large SMBs report negative effects from wage and salary increases in the second quarter. These firms are also the most affected by supply chain disruptions, with 15% citing this as a challenge compared with 8.6% of micro-SMBs.

Sector differences are also substantial. Construction and utilities businesses reported the strongest financial footing, with nearly 2 in 3 saying they are in better shape than six months earlier. Hospitality firms, including hotels and restaurants, are the most strained. Almost 1 in 4 said their financial situation worsened over the same period.

The overall picture is one of cautious progress. As tariffs raise costs and consumer demand shifts across categories, SMBs are finding that their stability depends on the choices they control and the economic forces they cannot. The report indicated that confidence is rising because many firms are learning to manage both.