3 Things You Need to Know About Business Funding in 2025

As we head into 2025 with a clean slate and renewed optimism, it’s critical to ensure your business is running on all cylinders, and that means ensuring you have adequate funding in place. But at the same time, it’s also critical to understand the state of the economy and how to adapt your financial strategies to thrive in it.

So in this article, I will break down three key things you need to know not only to survive, but thrive in today’s economy. And more importantly, how to avoid the costly and often devastating mistakes that even smart entrepreneurs make during an unstable economy, that typically lead to failure.

Access to business credit will be far more limited than you’re used to

Historically, underwriting guidelines tighten up as the economy gets weaker, and that’s exactly what’s happening right now.

Despite significant gains in the stock market, most people are not doing well financially. Credit card defaults have soared to the highest level we’ve seen in 14 years, auto loan defaults hit a 15 year high, and mortgage delinquencies have reached a 17 month record.

This should be no surprise because debt levels are at an all-time high. Americans today are being squeezed from both sides, with stagnant wages on one side and growing inflation on the other, forcing many to rely on credit to make ends meet. While it’s a poor financial choice, for many, it’s the only choice.

When this happens, creditors become more stringent in their underwriting to reduce their own risk of loss.

That means credit becomes more difficult to get, requiring a higher credit score and more documentation, and they will not offer as much as they would have in the past. Interest rates will also increase, making the credit more expensive to utilize.

This is already happening across all segments of the credit market.

You need to be more strategic and cautious than was necessary in recent years

When the economy is booming and you’re raking in cash flow at a healthy profit margin, you can (but shouldn’t) play a little fast and loose regarding how you use your funding. Lavish business events, speculative investments, and hiring sprees are often the norm during a strong economy, but that’s a dangerous move during economic decline.

In today’s economy, you must be ruthlessly strategic in your capital deployment or risk expensive outgrowing your revenue.

This means only leveraging debt with a near certainty of a quick and positive return on investment. Now, quick is somewhat subjective here and depends on your business model, size, and industry. Still, the goal is to generate a large enough ROI in a timeframe that allows you to repay the debt without negatively impacting your cashflow.

A few examples of sound strategic investments would include:

Equipment or materials needed to fulfill a deal you already closed
Expanding an already proven marketing campaign
Tangible assets, like real estate or existing businesses

This is critical to reducing risk and increasing the stability of your business.

Position your business to capitalize on unexpected opportunities

Some of the most significant opportunities you’ll see in your life will come during economic uncertainty, so it is vital to position yourself to capitalize on these opportunities when they cross your path.

The way to do this is to ensure you have access to capital and can deploy it as quickly as possible. That requires you not to max out your available funding. This is easier said than done, but if you’re disciplined, it can improve your financial trajectory in a life-changing way.

Often, these come in the form of business acquisition opportunities. Still, it could also be client contracts, patents or technology, partnership buy-ins, once-in-a-lifetime hires, or numerous other opportunities. The key here is to avoid speculation and focus only on opportunities nearly certain of success.

Closing thought to the start of a new year

With a new year comes new opportunities but also new risks. Our economy has been declining for several years with no sign of that changing anytime soon, and that uncertainty creates leverage—for good and bad outcomes. Those who understand this and act accordingly will most likely thrive and could become the next market leaders of their industries.