Small and mid-sized companies are feeling the pinch from higher costs, yet many still expect a better 2026. That was the message from Sharon Miller, President and Co-head of Business Banking at Bank of America, during a national broadcast interview. Her comments spoke to a key question for employers across the country: can rising optimism outlast stubborn expenses and tighter financing?
The discussion comes as business owners navigate elevated interest rates, wage pressures, and insurance increases. It also arrives at a time when consumer demand has held up better than expected. The push and pull between cost strain and confidence is shaping plans for hiring, pricing, and investment over the next 18 months.
Why this moment matters
Small businesses are central to the U.S. economy. According to federal estimates, there are more than 33 million small firms, employing roughly 46% of private-sector workers. Their decisions on staffing and spending often appear early in the economic cycle.
Since inflation peaked in 2022, price growth has slowed, but many expenses remain higher than before the pandemic. Borrowing costs climbed as the Federal Reserve raised rates to combat inflation. That made equipment financing, credit lines, and real estate loans more expensive for owners.
At the same time, supply chains have improved and freight costs have eased from their highs. Consumer spending has been steady, supporting sales for many local companies. These mixed signals explain why owners can feel squeezed and hopeful at once.
Costs are still elevated, and owners are adapting
Miller described a picture of firms managing three stubborn expense lines: labor, interest, and insurance. Wage growth has moderated from 2022 levels, yet competition for skilled workers remains. Higher rates raise the cost of holding inventory or expanding capacity. Insurance premiums, from property to health, continue to climb.
To protect margins, many companies are focusing on efficiency. Owners are renegotiating with suppliers, tightening payment terms, and automating back-office tasks. Some are delaying major purchases until financing becomes more affordable. Others are trimming nonessential spending to preserve cash.
“Optimism going into 2026” reflects a belief that costs can be managed and demand will hold.
Why confidence is holding up
Several factors support the brighter outlook. Many firms report steadier orders than they expected at the start of the year. Supply bottlenecks have eased, which reduces delays and improves planning. Wage growth is cooling without a sharp rise in unemployment, a combination that can help consumer spending.
Owners also expect more clarity on interest rates as 2025 approaches. If inflation continues to cool, borrowing costs could decline, making it easier to fund equipment purchases or refinance debt. That prospect is feeding longer-term plans even as near-term caution remains.
Pressure points to watch
Risks still loom. Sticky inflation could keep rates higher for longer. Insurance costs, especially for property and casualty, remain a pain point in many regions. Slower global growth could weigh on exports and supply chains. Any softening in consumer demand would hit smaller firms first.
- Interest rate path over the next year
- Insurance premiums and coverage availability
- Wage trends and hiring conditions
- Consumer spending and savings levels
What owners can do now
Advisers suggest stress-testing cash flow for different interest rate scenarios. That includes modeling debt service costs if rates stay unchanged through 2025. It also means mapping break-even points if sales slow. Firms that plan ahead can move faster when conditions shift.
Working with lenders to review credit facilities can help. Extending maturities, adding flexibility on covenants, or securing fixed rates where possible can reduce risk. Owners are also using data to sharpen pricing, reduce inventory carrying costs, and target higher-margin sales.
For hiring, companies are focusing on retention and training to limit turnover costs. Some are offering flexible schedules instead of across-the-board wage increases. Others are investing in tools that boost output per worker.
The road to 2026
Miller’s message captured a cautious but steady stance from business owners. They recognize the weight of higher costs, yet many are planning for growth if financing improves and demand holds. That balance could define the next year.
The takeaway is clear: confidence is not a strategy by itself, but it can guide action. Owners who manage cash, protect margins, and keep investment plans ready may be best positioned if rates ease. Watch for signs in credit markets, insurance renewals, and hiring data. Those will signal whether the optimism seen today can translate into stronger results in 2026.
