At a time when liquidity is more important than ever, small to medium-sized businesses (SMBs)  are navigating one of the toughest lending environments in recent memory. As they face a perfect storm of tariffs, supply-chain instability, inflation, and the looming risk of recession, banks are tightening their criteria in ways that exclude smaller businesses. 

In this post, we’ll examine the current lending landscape and look at some of the ways businesses can improve their access to cash and financial resilience. 

Lenders tighten the reins

A report published by the Secured Finance Network highlighted the challenges that companies in the lower middle market face in maintaining a healthy cash flow. Middle Market Lending in 2025: Adjustment Amid Uncertainty explored the economic uncertainty and tougher qualification criteria that characterize the loan market today.

According to the report, lending has tightened considerably, with 92% of banks and 67% of direct lenders failing to meet lending goals in Q1. At the same time, there is more financial activity happening in the lower middle market (companies between $10-20 million annual EBITDA), a bracket that is often underserved by traditional sources of financing. 

As a result, more SMBs than ever before are facing a financing shortfall and in dire need of bridge financing or liquidity support. 

Financial best practices for SMBs 

In times of economic uncertainty, shoring up liquidity is critical. That’s especially true for SMBs, which are more affected than large organizations by market volatility and less likely to be approved by traditional lenders for the funds they need to withstand economic shocks.

As a business owner, there’s not much you can do to change the way lenders make financing decisions, but you can take action to expand your access to funds and optimize your cash flow.

Here are six things you can do right now to improve your company’s financial position.

Know your financing options

Traditional bank loans are one of the most affordable financing types, but they are also one of the most difficult to qualify for. As little as 13% of small business loan applications are approved by banks, leaving many businesses reliant on other types of financing to secure working capital. 

Credit cards are the most popular alternative source of financing, with 83% of small businesses using at least one business credit card to finance operations. However, it’s also one of the costliest forms of financing, with average interest rates sitting at 21%. Before you resort to credit cards, explore the full range of alternative financing options available to you so that you can make more informed choices about online loans, merchant cash advances, invoice factoring, and more.

Improve your creditworthiness

By improving your business credit score, you can qualify for a wider range of financing products at more favorable rates and fees. Yet many business owners don’t realize they can take steps to improve and protect their score. Check with agencies such as Dun & Bradstreet, TransUnion, and Experian to find out whether your business is already on file. If not, apply for a D-U-N-S number and start building your profile. 

Protect your earned revenue

Commercial bankruptcies have been on the rise for over a year, and an unpredictable economy is likely to drive those numbers higher. You can protect your business from the effects of bankruptcy by performing due diligence on your customer base and supplier network. Collect data on their financial history from credit bureaus and check the news and review sites to find out who you’re doing business with. 

Accelerate time to revenue 

Access to credit is important, but there are other ways to get your hands on revenue sooner. Accelerating payments and reducing the number of write-offs can be a powerful way to improve cash flow and revenues. Yet many companies leave money on the table by failing to negotiate and enforce payment terms. One survey found that 93% of businesses experience late payments, while another found that hundreds of millions of dollars in revenue were lost to write-offs. These best practices can help you accelerate and optimize your payment processes.  

Mitigate business risk

If you can minimize your exposure to business risks, you may be able to avoid financial stress and reduce the need to secure additional financing. There are simple steps you can take to minimize your risk in five key areas: financial, operational, legal, reputational, and cybersecurity. Imposing firm payment terms, creating an employee handbook and business continuity plan, becoming ISO or SOC certified, and making sure you’re adequately insured are just a few ways of protecting your business better. 

Strengthen business resilience

At a time when the economy and the supply chain are more unpredictable than ever, your ability to withstand economic shocks has never been more important. There are many ways to strengthen your business resilience, including ensuring you are adequately insured, diversifying your banking relationships, factoring your invoices to improve your liquidity ratio, and avoiding too much concentration in your customer base. 

Opportunities on the horizon

The lending landscape may look challenging for the lower middle market, but by making changes to the way you source funds, manage cash, and protect revenue, you can ensure your business is ready to take advantage of growth opportunities, especially in in-demand sectors such as business services, healthcare, food and beverage, and logistics, to name a few. 

If you are interested in finding out how invoice factoring can help your company accelerate and stabilize cash flow, talk to an expert in your region.