Bank of America executive Sharon Miller said small and mid-sized businesses are facing higher costs yet remain upbeat about 2026, signaling resilience after a stretch of price and rate shocks. Speaking on The Claman Countdown, the business banking president and co-head pointed to steady demand and careful planning as reasons for the upbeat mood. The outlook matters for hiring, investment, and local spending across the country.
Her comments arrive as owners juggle wage growth, insurance premiums, and borrowing costs. Many hope that easing inflation and potential rate cuts could open room for expansion over the next 18 months. The next year will test whether firms can protect margins without losing customers.
“Costs are rising, but confidence is holding.”
Why costs are still elevated
Owners report higher expenses across payroll, benefits, and insurance. Several industries also continue to manage uneven input prices, from materials to shipping. While headline inflation has cooled from its peak, many line items important to smaller firms have reset at higher levels. That gap keeps pressure on pricing and cash flow.
Financing remains another sore point. Even after modest dips in market rates, borrowing is pricier than in the low-rate years. For firms that rely on credit lines to manage inventory or seasonal swings, interest costs feed directly into margins. Miller noted that companies are adjusting by stretching payment terms, seeking fixed-rate options, and trimming nonessential spend.
Why optimism is building for 2026
Despite the squeeze, many owners expect steadier conditions by late 2025 and into 2026. The reasons vary: cooling inflation, gradual rate relief, and clearer customer demand. For mid-sized firms with multiyear contracts, visibility into orders supports plans to hire and invest in technology.
Miller said sentiment is tied to discipline. Companies are stress-testing budgets, locking in supplier agreements, and looking for productivity wins. Some are targeting modest price increases paired with service upgrades to keep customers loyal. Others see a chance to gain share as weaker rivals pull back.
Different sectors, different pressures
Service businesses cite wage and insurance costs as their top hurdles. Manufacturers point to materials, freight, and equipment financing. Construction firms see labor availability and project delays as key risks. Retail and restaurants face thin margins and must balance menu or shelf price changes with foot traffic.
- Labor: Pay and benefits remain elevated, but help retention and service quality.
- Capital: Higher rates slow big-ticket purchases; fixed-rate terms offer relief.
- Supply: Contracts and volume discounts help tame input volatility.
What lenders and advisors are watching
Lenders report stable credit quality overall, with pockets of strain in interest-sensitive niches. Cash flow forecasting and covenant discipline are top of mind. Advisors urge owners to map debt maturities now and consider refinancing windows if rates ease. Many firms are also boosting liquidity buffers to handle surprises.
Technology spend continues, but with tighter payback hurdles. Automation, inventory tools, and data dashboards are popular because they cut errors and speed decisions. Miller highlighted that spending is shifting from “nice-to-have” tools to projects with clear returns in six to twelve months.
Signals to track into next year
Hiring plans are a key bellwether. If owners keep adding staff, it suggests confidence in revenue. New orders and backlogs, especially in manufacturing and construction, offer another early read. Price sensitivity among customers will also guide strategy, as firms decide how much of their costs they can pass along.
- Watch input and insurance renewals; negotiate early.
- Revisit pricing in small steps, paired with service gains.
- Plan for multiple rate paths; model fixed and floating scenarios.
The bottom line for communities
Small and mid-sized businesses drive local jobs and services. Their ability to manage costs while planning for growth will influence wages, storefront openings, and tax bases. Miller’s message suggests steadiness rather than a surge: careful spending now, with a line of sight to expansion if conditions improve.
The next few quarters will show whether easing inflation and any policy shifts translate into better margins. If they do, hiring and investment could pick up into 2026. If not, expect owners to double down on efficiency and cash preservation. For now, resilience and discipline define the path ahead.
