Quick Note: We're sending today's newsletter to clarify that the case study mentioned in this newsletter is hypothetical based on a combination of different deals we are seeing in the market, and not a real deal we did.

Cash Flow Under Fire: Why Tariffs Are Quietly Killing Underdiligenced Deals — and How Smart Buyers Stay One Step Ahead

The Known Unknowns of 2025 Business Buying

If you’re buying a business in 2025, your unknown unknown isn’t just a missed forecast - it’s a systemic vulnerability buried in your supply chain, disguised in a vendor agreement, or lurking behind margin assumptions that feel too stable for this market.

At Pioneer Capital Advisory, we’ve advised on 82 SBA-financed acquisition closings since May 2022. And in Q2 2025, one trend is unavoidable:

The bar hasn’t been raised on business buying. The floor has collapsed.

Deals are still closing. But only for buyers who lead with narrative clarity, sourcing intelligence, and margin realism. This newsletter breaks down why tariffs are no longer just a macro headline and how they’ve become the silent killers of underdiligenced deals.

Tariffs Are Now a Risk Variable, Not a Footnote

Yes, tariffs are technically taxes. But in 2025, they function more like landmines: eroding cash flow, spiking COGS, and sabotaging DSCR before the ink is dry on your LOI.

Here’s what’s live as of April 2025:

• 10% blanket tariff on all imports
• Up to 50% reciprocal tariffs on goods from countries with protectionist policies
• 145% cumulative tariffs on select Chinese goods
• 25–35% tariffs on industrial components, electronics, and commercial machinery parts

These aren’t theoretical- these are cash flow events. If your business touches international supply chains and you haven’t modeled for these inputs, you may be walking into a debt package that collapses within 60 days post-close.

New SBA Lender Psychology: It’s Not Just About the Numbers Anymore

A quiet but powerful shift is underway in SBA underwriting. Banks are no longer only asking:

“Can this business cover its debt?"

Now, they’re asking:

• “Can this buyer think clearly under pressure?”
• “Do they understand their inputs?”
• “Can they explain—competently—how to navigate cost volatility, sourcing constraints, and pricing power?”

From a senior SBA lender at a national bank:

“We’re now expecting the business plan to speak directly to sourcing, price elasticity, and margin variability. If it doesn’t, the file stops cold.”

The Business Plan Is No Longer a Form — It’s a Stress Test

In today’s SBA landscape, your business plan is being read as a proxy for your competence. Not fluff. Not formality. But as a risk narrative.

A plan that commands respect includes:

• Narrative Clarity: Why this business, why now, why you
• Sourcing Intelligence: Who your vendors are, how often they price, and what your alternatives are
• Pricing Strategy: What authority you have to raise prices, and how quickly
• Margin Shock Resilience: What your DSCR looks like if COGS jumps 10–20%
• Growth Plans with Guardrails: Expansion is great—but not if it’s built on fantasy
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Another SBA lender shared:

“We’ve become more conservative on margin. But we’ve become more bullish on smart buyers. The plan is how we separate the two.”

Why SBA Loan Brokerage Firms Are the Smart Buyer’s Edge

At Pioneer Capital Advisory, we don’t just monitor the SBA market—we live inside it.

Because we run a competitive process for every deal, we’re constantly in dialogue with lenders. That means we see the shifts before term sheets get retracted or approvals stall.

We know:

• Which lenders are pausing new deals
• Which ones have silently raised DSCR requirements for inventory-heavy transactions
• Which banks are greenlighting deals quickly—if and only if the narrative holds water
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That intelligence is the buyer’s edge. It’s why working with an SBA brokerage firm isn’t just helpful - it’s become essential.

Hypothetical Case Study: Tariffs, Turnover, and a Deal That Wouldn’t Work Today

This is a hypothetical case Pioneer Capital Advisory developed to illustrate how macroeconomic shifts-like the recent round of tariffs-can quickly derail a deal structure that would have worked just months ago. While the numbers and structure are modeled on real-world scenarios we’ve encountered, this example is meant to educate buyers on margin compression, raw material exposure, and the importance of stress-testing deals for volatility.

Now let's model the acquisition of a high-velocity steel and aluminum distributor. What looked like a strong, financeable deal on paper-complete with sound liquidity, clean EBITDA margins, and healthy inventory turnover begins to break down rapidly once post-tariff pricing is factored in.

The Buyer:

• Former VP of Ops at a Fortune 100 industrial company
• $675K in personal liquidity
• Spouse earns $240K as an attorney
• Built a 36-month model—assuming static 2024 cost structures
• Seeking $2.975M SBA loan

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The Target:

• Midwest-based distributor of steel and aluminum
• SDE: $1.15M | Revenue: $3.75M
• Inventory: $825K, turning every 42 days
• 87% of raw materials sourced from 3 Chinese vendors, all on floating monthly rates
• No fixed-price contracts. Customers B2B on net-30, highly elastic

Pre-Tariff Model (March):

• Gross Margin: 32.1%
• COGS: $2.55M
• EBITDA: $710K
• DSCR: 1.46x
• Post-Close Liquidity: $275K
• Working Capital Need Modeled: $375K

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Post-Tariff Reality (April):

• Landed costs rose 23%
• Gross Margin: 18.3%
• EBITDA: $387K
• DSCR: 1.01x
• Inventory turned 8.5x/year → P&L impact hit inside 45 days
• Lender re-ran the file → declined

This wasn’t a “bad business.” It was a strong business bought without margin foresight - and it couldn’t withstand macro whiplash.

Own a Business? We’re Now Supporting SBA Refinances

For operators with $1M+ in SBA-eligible debt, we’re now offering tailored support for:

• Monthly payment reduction
• Debt consolidation
• Liquidity unlock and recapitalization

We prioritize loans around $1M but take on larger profiles where the structure justifies it. If you haven’t stress-tested your balance sheet in the last 6 months, now is the time.

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Final Word: Underwriting Isn’t Tighter. It’s Smarter. Are You?

In 2023, your deal lived or died on valuation.

In 2025, it lives or dies on:

• Margin resilience
• Operational depth
• Buyer IQ

If you’re serious-six figures liquid, ready to articulate your plan, and clear-eyed about risk-we’re ready to help.

But if your model assumes static inputs, your plan ignores COGS volatility, or you’re treating tariffs like tomorrow’s problem—this market will move on without you.

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Let’s Talk Strategy

​Book a call and we’ll walk you through what real SBA readiness looks like in 2025.

Matthias Smith​
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Disclaimer: The information in this newsletter is for informational purposes only and should not be considered legal or financial advice. Business buyers are encouraged to consult with their legal counsel and accountant to ensure the proper structuring of their transactions and to fully understand the tax implications of seller financing.

Thanks for reading! Feel free to reply directly to this email with any questions or thoughts.