How Mid-Market Firms use Private Credit to Beat Tariffs
Key Highlights
Persistently high interest rates and geopolitical instability are squeezing margins and disrupting operations for mid-sized businesses. Borrowing is more expensive, and supply chains are under pressure.
Tariffs—especially from the U.S. and China—are hitting manufacturing, tech, agri-food and consumer goods, amongst other sectors, often harder than pandemic-era disruptions. Global trade fragmentation is increasing cost and complexity.
With bank appetite for lending tightening, private credit has grown to a ~$2 trillion market, offering mid-market firms faster, more flexible financing options. Even major banks are now leaning on private lenders to close deals.
Manufacturers are retooling supply chains, tech firms are relocating production, agri-businesses are managing export volatility, and consumer brands are shifting sourcing—all funded by private credit.
To stay competitive, businesses must lock in diverse capital sources, embed geopolitical risk into planning, and act quickly when trade policies shift—turning volatility into opportunity.
A confident business executive stands in a modern warehouse, symbolising a mid-market firm navigating trade challenges
Stormy Economic Seas: High Rates, Trade Tensions, and Geopolitical Instability
Mid-market companies in 2025 face a perfect storm of macroeconomic and geopolitical headwinds.
Persistently high interest rates have raised the cost of capital and debt service. Central banks, led by the U.S. Federal Reserve, have kept rates elevated to combat inflation. And new tariff policies threaten to keep inflation pressures simmering.
In fact, analysts suggest that broad new U.S. tariffs announced in early 2025 could push up prices and delay any rate cuts by the Fed, as policymakers worry about tariff-fueled inflation.
Higher financing costs directly squeeze mid-sized firms’ margins and make new investments or refinancing more difficult.
Compounding the challenge, corporate default rates are rising after years of cheap money. Defaults in U.S. middle-market credit spiked in 2024. For example, defaults in a private credit portfolio surged to 8.1% in 2024 (from 3.6% in 2023) amid higher borrowing costs.
Even broadly syndicated loan defaults hit post-pandemic highs around 5–7%, the highest since 2020, signaling mounting stress on borrowers. For mid-market executives, this means banks have grown warier of extending credit in an uncertain economy.
Trump-era tariffs and new trade barriers are hitting many mid-market sectors just as hard as macroeconomic forces. The manufacturing, technology, agriculture/food, and consumer goods industries have been particularly exposed.
Donald Trump’s trade war, which initially began in 2018, has seen a revival and escalation. It has created an unprecedented challenge due to the rapidly shifting tariff policies and their fallout.
The UK’s export credit agency chief noted that near-daily changes in U.S. tariff policy under Trump have made it harder to predict financial fallout for businesses than during the Covid pandemic. That is a stunning comparison: unlike the one-off shock of the pandemic, trade tensions are an ongoing uncertainty that complicates supply chains and pricing for months on end.
Tariffs implemented or proposed in recent years read like a roll call of pain points for mid-market firms. For example, steel, aluminium and auto parts face 25% U.S. import tariffs in some cases, directly raising costs for manufacturing exporters and suppliers.
Broad categories of Chinese goods have been hit with ever-higher U.S. tariffs. By early 2025 the cumulative tariffs on Chinese imports reached an astonishing 145% on average, provoking a tit-for-tat 125% tariff by Beijing on U.S. goods. Such extreme rates reflect multiple layers of duties and the collapse of prior trade deals.
Even U.S. allies like the EU, UK, Canada, and Mexico are caught in the fray: many now face a baseline 10% U.S. tariff on their goods for 90 days pending trade negotiations. In short, the tariff environment has become volatile and pervasive, affecting raw materials, components, and finished products across industries.
Global trade fragmentation and geopolitical instability amplify these pressures.
The U.S.-China economic decoupling continues, with export controls on technology and efforts to “friend-shore” supply chains adding friction to commerce. Military conflicts and tensions – from the war in Ukraine to instability in the Middle East – further roil markets.
Heightened geopolitical risks tend to hurt asset prices, raise government borrowing costs, and curb lending. During major geopolitical shock events, stock markets globally drop about 1% on average (and >2.5% in emerging markets. And advanced-economy sovereign bond spreads jump ~30 basis points as investors demand a risk premium.
In practical terms, a mid-market company might see its equity value dip and borrowing costs rise whenever international tensions flare. Moreover, these shocks have cross-border spillovers. If a firm’s main export market or supplier region is embroiled in conflict or trade disputes, the contagion can hit the firm’s own financial health.
For example, a European machinery manufacturer that sells to China feels the pinch if U.S.-China tariffs slow Chinese demand. An Asian electronics distributor sees risk premiums climb if war risk threatens shipping routes.
All these factors create a challenging paradox for mid-market firms: just as their operating costs and risks are rising from tariffs and instability, traditional financing is getting scarcer and more expensive.
Banks and public markets have become more cautious. We see this in practice through anecdotes and data: U.S. banks are tightening credit amid recession fears and trade uncertainty, and even government export finance arms are stepping in with guarantees to encourage banks to lend despite tariff-related default risks.
The result is a financing gap – one that private credit lenders are increasingly filling.
Private Credit: A Financial Lifeboat for the Mid-Market
Facing the one-two punch of economic and trade turbulence, many mid-sized companies are turning to private credit as a lifeline. This form of financing has surged since the Global Financial Crisis and has truly come of age in the current environment.
In essence, private credit offers an alternative capital source when banks retreat or when companies need more tailored funding solutions – exactly the situation many mid-market firms find themselves in due to tariff disruptions and high-rate stress.
Private credit markets have expanded rapidly over the past decade, reaching about $2 trillion globally in 2023. That equates to roughly 12% of the amount of bank loans to non-financial companies – up from only 5% in 2012.
Growth of global private credit market from 2012 to 2025, showing rapid expansion in direct lending and middle-market loans (Source: OECD)
The chart above shows how various components of private credit – including direct lending funds, collateralized loan obligations (CLOs) focused on middle-market loans, business development companies (BDCs), and even the “dry powder” of undeployed capital – have all grown significantly.
This rise has been especially pronounced in the U.S., but Europe and Asia are now rapidly catching up. Such growth reflects investors’ search for yield and companies’ need for capital.
Importantly, much of this private credit boom is centered on middle-market lending, where traditional bank lending has pulled back.
Why is private credit so attractive to mid-market companies right now? The current climate has underscored some advantages:
Availability and Speed: Banks have become more cautious and slow-moving amid uncertainty. By contrast, private credit funds often have capital readily available and can execute deals quickly. Private debt funds often outshine traditional banks through flexible solutions and rapid execution, paired with a higher risk appetite – allowing them to capture opportunities banks pass up.
In a volatile tariff situation, this responsiveness is key. For example, if a manufacturer suddenly needs funding to move its supplier base from China to Vietnam due to tariffs, a direct lending fund may provide a customized loan within weeks, whereas arranging a bank syndicated loan could take months (if it’s even possible in the current market).
Flexible, Customized Structures: Private lenders can tailor loans with bespoke terms (e.g. longer grace periods, PIK interest, covenants that suit the business cycle) that mid-market firms need when facing unpredictable cash flows from trade disruptions. They may also take a higher risk on collateral or cash flow lending than a bank would.
Private credit deals often involve bespoke terms and structures – including covenant protections or asset-based lending features – that provide borrowers flexibility and protection through volatile periods. Mid-market CEOs appreciate this flexibility when tariffs or supply shocks hit, since they might need covenant headroom or incremental draws for working capital.
Longer-Term Orientation: Private credit funds (backed by institutional investors like pension funds or family offices) often have a longer investment horizon and can be patient through cycles. One private credit manager noted the importance of “patience and long-term lenders so periods of volatility do not hurt our business”.
This patient capital approach means a mid-market firm can secure a loan that won’t evaporate if market sentiment swings next quarter. In contrast, banks might pull credit lines or hesitate to renew facilities in the face of trade war news.
Resilience in Volatile Markets: The tariff-driven volatility in public debt markets has actually opened a door for private credit. Wall Street banks, for instance, have struggled to syndicate some loans amid tariff uncertainty and have ended up calling in private credit funds to take on those deals.
According to a Bloomberg report, “tariff drama” is literally pushing big banks into the arms of private credit, as the banks cannot reliably offload debt through the usual leveraged loan channels. This dynamic has made private credit a go-to option for financing acquisitions and refinancings that might otherwise falter.
Indeed, private lenders see the current trade disruptions as an opportunity. A recent analysis by Octus notes that Trump’s escalating tariffs have heavily disrupted the broadly syndicated loan (BSL) market, and private credit providers are stepping in to recapture market share from banks.
Refinancing deals that would have gone to the syndicated loan market are now being rerouted to private credit markets to avoid delays or failures.
For example, a $5.75 billion bank-arranged bridge loan for a major tech acquisition (Dun & Bradstreet by Clearlake Capital) faced uncertainty due to tariff concerns – prompting talk that private credit lenders might step in to finance the deal before closing.
This illustrates how even large transactions are shifting toward private debt solutions when tariffs add risk. For mid-market companies, which often lack easy access to bond markets or big syndicates, the message is clear: private credit is open for business when other channels close.
Four key industries leveraging private credit to cope with tariff and trade-related challenges
1. Manufacturing: Reworking Supply Chains and Capitalising on Gaps
Manufacturing firms have been on the front lines of the trade wars. Tariffs on steel, aluminium, machinery, and components directly raise input costs. Manufacturers also face indirect effects as supply chain partners pass along their own tariff-driven cost increases.
Many mid-sized manufacturers have responded by reworking their supply chains. For instance, shifting to domestic or third-country suppliers, building up inventory before tariffs hit, or investing in new local production for previously imported parts. All these moves require capital. Private credit has become a crucial funding source to enable such strategic pivots.
A U.S automotive parts producer hit by a 25% tariff on imported metal might secure a private credit loan to purchase advanced machine tools and start sourcing metal domestically. Traditional banks might balk at the risk or collateral, but a private lender can structure the loan against the equipment and projected cash flows from new contracts.
In another case, when tariffs on industrial components from China jumped, some U.S. manufacturers bulked up inventory ahead of tariff implementation to avoid immediate price spikes. This kind of inventory front-loading ties up cash – and increasingly companies have turned to asset-based loans from private credit funds (using that inventory as collateral) to finance the buildup.
Private credit is also helping manufacturing businesses capitalize on market gaps created by tariffs. When a tariff makes one company’s products pricier, it opens the door for a competitor (with a different supply base) to grab market share – if they can scale up quickly.
Mid-market manufacturers with an agile mindset are using direct loans to fund expansions, acquisitions of distressed competitors, or new product lines to take advantage of such openings.
For instance, if tariffs make imported electronics assembly costly, a mid-sized contract manufacturer in Mexico or Vietnam might get a private credit-backed loan to expand capacity and win business from U.S. customers seeking tariff-free production.
The ability of private debt to be deployed relatively quickly means these firms can act while the window of opportunity is open.
2. Technology: Funding Resilience in a Decoupling Era
Tech companies – especially hardware and electronics firms – have been deeply affected by U.S.-China trade tensions and export controls. Tariffs on components like semiconductors, circuit boards, and consumer electronics have forced mid-market tech players to rethink their global footprint.
Many are diversifying manufacturing out of China, investing in “China +1” strategies (e.g. setting up assembly in Vietnam, India, or Eastern Europe), or localising more production in end markets like the U.S. Such transitions are capital-intensive and risky, often exceeding the appetite of banks.
Take the example of a mid-market electronics accessories company: previously it imported finished goods from China, but tariffs have pushed costs too high. The company decides to build a final assembly facility in Mexico to serve the U.S. market tariff-free.
To finance this, it obtains a $30 million unitranche loan from a private credit fund, secured by the company’s assets and the anticipated cash flows from U.S. sales. The private lender, understanding the strategic logic and the sponsor’s backing, is willing to lend at a fixed rate for 5 years – something hard to get from a bank in this uncertain climate.
This allows the tech company to proceed with its relocation plan and remain competitive on price. In addition, tech companies often have fewer tangible assets, which makes traditional bank lending tougher. Private credit lenders, however, will underwrite based on recurring revenue or intellectual property.
We’ve seen growth of venture debt and private credit for tech as equity funding became more expensive with high interest rates. These loans provide a bridge for tech firms whose earnings are volatile due to geopolitics (e.g. sudden loss of the China market or export restrictions).
By locking in financing now, mid-market tech players ensure they have liquidity to weather export bans or to redesign products to meet new trade rules. It’s worth noting that geopolitical competition is not just a risk but also an opportunity for some – for example, U.S. government incentives like the CHIPS Act for domestic semiconductor production.
Private credit is flowing into these areas as well, often in partnership with private equity, to finance new facilities and R&D, betting on long-term demand.
3. Agri-Food: Smoothing Over Trade Spats and Commodity Shocks
Agriculture and food companies have been repeatedly caught in the crossfire of trade disputes – from Chinese tariffs on U.S. soybeans, to NAFTA/USMCA produce disputes, to sudden bans on grain exports during conflict.
For mid-market agri-food businesses (such as food processors, farm cooperatives, and ingredient suppliers), tariffs can slam export sales or raise input costs (for example, tariffs on farm machinery or fertilizer). These firms also face commodity price volatility exacerbated by global instability (like the Ukraine war driving up grain and energy prices).
Private credit has increasingly stepped in via specialized agri-food financing. One example is private lenders providing crop-backed loans or inventory financing to exporters when foreign tariffs cause a glut at home. During the U.S.-China trade standoff, some soybean processors secured loans from non-bank sources to store excess soybeans that Chinese buyers would have taken – essentially allowing them to hold inventory longer until they found alternative markets or until subsidies arrived.
Similarly, agri-tech companies are tapping private credit for expansion as they look to improve efficiency (to offset tariff costs) or enter new geographies. Another way mid-market agri-food firms leverage private credit is in supply chain financing arrangements. If a tariff disrupts the usual flow (say, a U.S. fruit exporter faces a new tariff in Europe), a private credit fund might finance a supply chain pivot – like helping fund a domestic buyer or processor to absorb the produce, or financing a move into a different export market.
These deals often require creative structuring and an understanding of the commodity’s value; private lenders with expertise in trade finance or commodity finance have been active here, while many traditional lenders retrenched from commodities during volatile swings.
Moreover, geopolitical tensions have raised the premium on food security. This is leading to government-supported deals (e.g. Gulf states investing in overseas farmland, or strategic stockpiling ventures) where private capital co-invests.
Mid-market agri companies can benefit by aligning with these initiatives, backed by private credit financing that bridges public and private interests.
4. Consumer Goods: Navigating Tariff Costs and Demand Uncertainty
In the consumer goods sector (apparel, home goods, electronics, appliances, etc.), mid-market brands and importers have dealt with tariffs largely by adapting sourcing strategies and pricing – moves that often need financing support.
Many consumer goods importers in the U.S. were hit by the Section 301 tariffs on Chinese products (10% then 25% on a vast array of goods). These companies, often not huge multinationals, scrambled to shift orders to other countries or negotiate price concessions.
Private credit has proven valuable for providing the capital cushion during this transition. For instance, a mid-sized furniture importer facing 25% tariffs on Chinese-made couches might secure a loan to fund a new sourcing office in Vietnam and to cover the higher upfront costs of moving production there (e.g. new supplier molds, quality control processes). The loan could be structured to be repaid gradually as the cost savings from avoiding tariffs accrue.
Consumer goods firms have also used private credit to manage the demand side of the equation. High interest rates and inflation (some of it tariff-induced) have tempered consumer spending in certain segments, raising the risk of inventory gluts.
A fashion retailer stuck with excess inventory due to a sudden drop in consumer demand (perhaps after tariff-related price hikes) might turn to a private lender for a short-term liquidity loan, using inventory as collateral, to avoid fire-sales that could damage the brand.
In 2025, uncertainty is as much about consumer sentiment as about policy – will prices rise further? Will tariffs be rolled back and allow cheaper imports, or will they persist? This uncertainty makes traditional lenders skittish, but private credit funds are more willing to underwrite that risk for a suitable return.
Another trend is private credit financing buyouts or carve-outs in consumer goods.
Tariff pressures have strained some companies to the breaking point, creating opportunities for those with capital to acquire brands or product lines. Direct lenders often partner with private equity here, providing the debt for acquisitions of distressed or divesting consumer product companies.
By doing so, they enable new ownership that can reorganize supply chains and pricing without the baggage of the previous balance sheet. Mid-market businesses that proactively restructure with private credit financing can emerge stronger – for example, a consumer electronics wholesaler might use a private debt-funded recapitalization to pay off bank debt and get more flexible terms, giving it breathing room to adapt its product lineup in response to import taxes and compliance rules.
Across all these industries, the common theme is that private credit is offering mid-market firms a chance to be agile and resilient – to finance defensive measures (like bridging cash flow gaps or refinancing expensive debt) and offensive moves (like investing in new capacity or acquisitions) amid tariffs and turmoil.
Banks’ caution and reduced loan activity have created a gap that private credit funds are filling, especially for mid-sized companies that banks often overlook. This trend has only accelerated in the current environment.
Non-bank lenders are stepping up where banks pull back, whether that’s funding a tariff-weary exporter, a tech firm positioning for geopolitical shifts, or any company facing an uncertain global market.
Klar Capital’s View: Strategies for Mid-Market Resilience in 2025
From Klar Capital’s perspective as advisors in the mid-market space, we see three key insights emerging from this convergence of high rates, trade tensions, and private credit growth.
Business leaders in mid-market companies should take these viewpoints into account as they plan for the remainder of 2025 and beyond.
Financing Flexibility is a Strategic Imperative.
In a world of constant uncertainty – where a tweet or sudden policy change can impose a 10% or 25% tariff overnight – companies need to have flexible financing options at the ready. Relying solely on traditional bank loans or waiting for public markets is a risky proposition when conditions can change on a dime.
We advise mid-market executives to diversify their funding sources and establish relationships with private credit providers proactively.
This might mean securing a direct lending facility or credit line before you desperately need it, or arranging for accordion features that allow you to tap additional funds quickly. Having capital available on short notice can make the difference between capitalizing on an opportunity (like grabbing a competitor’s market share when they’re crippled by tariffs) and falling behind.
As one private lender told us, “We’re there to provide certainty of funds when others won’t.” In practice, treat your capital structure as part of your strategic supply chain – build in redundancies and alternative routes just as you would with suppliers.
Geopolitical Risk Management is now Core to Financial Planning.
Tariffs and geopolitical tensions are not just an externality to be dealt with by government affairs; they directly impact the financial health of companies. Executives must incorporate geopolitical scenario planning into their budgeting, treasury management, and investment decisions.
Klar Capital’s take is that mid-market firms should stress-test their business under various tariff scenarios – for example, what if your main import’s tariff doubles? What if a key export market closes for a year? Identify the financial weak points (margins, debt covenants, etc.) under those scenarios and shore them up. This could involve hedging strategies or simply maintaining higher liquidity buffers.
We often recommend clients maintain an extra cash reserve or access to contingency financing equal to at least 3–6 months of operating costs in case a trade shock disrupts revenues. Additionally, pricing strategies must be more dynamic.
Companies that can swiftly adjust pricing or find cost savings to offset tariff impacts will fare better; this agility might require IT investments or partnership with suppliers – which again may be facilitated by creative financing. Ultimately, treating geopolitical risk like weather risk – something to monitor constantly and insure against – is now part of the CFO’s job description.
The IMF’s data on how geopolitical shocks raise borrowing costs is a reminder: political events can hit your bottom line like a recession would. So, plan for them with the same rigor as you do for economic cycles.
Opportunity Amid Chaos: Offence can be the Best Defence.
While many focus on the challenges, Klar Capital sees significant opportunities for mid-market businesses that have the courage and capital to play offense during this turbulent period. Tariff and trade disruptions are reshuffling industries – opening gaps that did not exist before.
Companies that invest strategically now can emerge as winners. For example, if a foreign competitor is cut off due to tariffs, a mid-market firm can capture that market – but perhaps needs to expand capacity or distribution quickly, which may require acquisition financing or growth capital.
We believe private credit-backed growth plays and acquisitions will be a hallmark of savvy mid-market leaders in 2025. These moves should be pursued judiciously, of course, with solid due diligence and integration plans.
But the message is: don’t just hunker down – scan the horizon for chances to leap forward.
We’ve worked with clients who used supply chain disruptions as an impetus to reinvent their operating model (for instance, digitizing processes to cut costs) and leveraged direct loans to fund that transformation. The result: they not only mitigated the immediate issue but also improved their competitive position.
In summary, mid-market executives should ask, “What opportunities are these global shifts creating, and how can we seize them with the help of smart financing?” Sometimes, the best defense against an uncertain world is a bold offense supported by ample capital.
To operationalise these viewpoints, we recommend a few concrete strategic steps:
Build a Multi-Pronged Capital Stack: Mix bank credit with private credit facilities, supplier financing, and possibly government export/import bank programs. This redundancy ensures funding in both good times and bad.
Action: Engage an advisor to explore private debt options (term loans, mezzanine, etc.) and lock in capital while market conditions allow.Align Finance with Supply Chain Strategy: As you diversify suppliers or re-shore production to dodge tariffs, align your financing. You might need project finance for a new plant or inventory loans for stockpiling critical materials.
Action: Coordinate your COO and CFO plans; model the working capital needs of different trade scenarios and secure financing commitments for each.Increase Transparency and Monitoring: Lenders (bank or non-bank) are more comfortable extending credit if they have visibility into your performance and plans. Provide regular updates on how you’re managing tariff impacts and geopolitical risks.
Action: Develop a dashboard for internal use and for lenders tracking key metrics (revenue sensitivity to tariffs, input cost trends, etc.), possibly leveraging insights from big data or consulting analyses on global trade dynamics.Stay Nimble and Proactive: Don’t wait for the next tariff list or crisis to hit. Proactively engage in industry coalitions to anticipate policy shifts, and consider moderate stockpiling or forward-contracting crucial inputs if you suspect a tariff is coming (bearing in mind the cost of capital to do so).
Action: Create an internal geostrategy task force to iterate scenarios and action plans quarterly. This should include financial modeling for each scenario with pre-approval for certain responses (e.g. if scenario X occurs, draw $Y from our private credit facility to cover needs).
By adopting these practices, mid-market businesses can turn private credit from a last resort into a strategic enabler – a source of strength that not only buffers against shocks but funds the moves that keep them ahead of the competition.
The Road Ahead: Tariff Trajectories and Predictions for Business Leaders
What might the future hold for tariffs and trade tensions? While the crystal ball is always cloudy, we offer three informed predictions about how tariff policy could evolve in the coming years and what those changes would mean across industries:
Prediction 1: Tariffs Become a Long-Term Fixture – Especially in Strategic Sectors.
Far from a temporary negotiating tactic, tariffs (and related trade barriers) are likely to remain elevated and even institutionalized as a long-term tool of economic policy.
In particular, we expect U.S.-China decoupling to keep tariffs high on technology, electronics, and other strategically sensitive goods. For tech industry leaders, this means planning for a future where critical components always carry some tariff or restriction – so dual sourcing and local sourcing will be essential.
Manufacturing firms should similarly assume that tariffs on key inputs (steel, aluminum, etc.) could persist; investing in efficiency and alternative materials will pay off if high import costs become the “new normal.” On the flip side, there may be selective easing of tariffs with allied nations in exchange for cooperation (for example, the US and EU could drop certain tariffs if they align on tech standards or trade rules against non-market economies).
Business leaders in industries like automotive or machinery might see some relief or exemption opportunities by emphasizing domestic job creation or partnering within trade blocs. Overall, however, the era of ultra-low tariffs is unlikely to return soon – plan for a baseline of friction in global trade. Strategically, companies should bake in these costs when evaluating investments: a project that is only viable under zero tariffs might be too risky to pursue. Instead, focus on initiatives that are robust to continued trade barriers.
Prediction 2: Trade Blocs and “Friend-Shoring” will Redefine Supply Chains.
We foresee a reorganization of global trade into tighter blocs, where tariffs (and trade rules) are lower within aligned groups but higher between rival spheres. This means the pattern of tariffs will shift – perhaps lower tariffs or new trade agreements among allied countries (e.g. a revived Trans-Pacific partnership minus the geopolitical adversaries, or deeper EU-US industrial tariff cooperation), coupled with sustained or even higher barriers between great-power rivals.
For business leaders in consumer goods and agri-food, this fragmentation implies you may need to tailor your market strategy regionally. For instance, a food exporter might enjoy easier access to markets in countries part of its home country’s alliance, but face hurdles selling to others – so diversifying customer bases and focusing on “friendly” markets could reduce tariff exposure.
Manufacturers might establish regional production hubs: one factory for the Americas, another for Europe, another for Asia, each serving its bloc to minimize cross-bloc tariffs. This trend effectively trades some efficiency for greater reliability.
Strategic implication: supply chain managers and CEOs should collaborate on a geographical diversification strategy that optimizes for the lowest-tariff pathways. Also, expect regulatory and standards divergence to accompany this (e.g. different product certifications needed in different blocs); companies that invest in modular product designs that can be adapted per region will handle this best.
Private credit and private equity investors are likely to fund a lot of this supply chain reconfiguration – we expect a continued boom in financing for near-shoring projects, distribution center relocations, and the like, as capital follows the new trade flows.
Prediction 3: Tariff Policy itself Remains Unpredictable – Agility will Outpace Forecasting.
Our third prediction is a bit paradoxical: even as we anticipate certain broad trends (like persistent strategic tariffs), we acknowledge that tariff policy will continue to gyrate with leadership changes and economic pressures.
Elections, geopolitical events, or economic downturns could prompt abrupt shifts – such as a temporary tariff truce to fight inflation, or conversely a sudden tariff spike as political posturing. The lesson for business leaders in any industry is that agility beats attempting to perfectly predict policy.
A clear recent example: in early 2025 the U.S. administration paused planned tariff increases for 90 days – a welcome breather, but with the explicit warning that those tariffs could snap back if negotiations falter.
Rather than betting on a specific outcome (say, “tariffs will go away next year, so we’ll wait it out”), savvy companies will build agility to react quickly. If you’re in retail or consumer goods, this might mean flexible contracting with suppliers (so you can switch sources if a tariff hits one country).
In agriculture, it means lining up multiple export markets and being ready to pivot sales if Country A imposes a barrier (as we saw when exporters found new buyers after China’s farm product tariffs). For tech, it involves staying ahead on compliance and having backup designs that use components from tariff-free origins.
Essentially, the strategic mindset should be: hope for the best, prepare for the worst, and be ready to move fast when the rules change. Companies that cultivate this nimbleness – supported by strong liquidity and robust risk management – will outcompete others in this era of uncertainty.
In conclusion, mid-market companies in 2025 are navigating a landscape where economic and geopolitical forces are deeply intertwined.
Private credit has emerged as a crucial tool, enabling these businesses to survive and thrive amid high interest rates, rising defaults, tariff aftershocks, and global instability.
By understanding the macro trends, learning from cross-industry examples, and heeding strategic advice (such as Klar Capital’s viewpoints and the predictions above), business leaders can steer their companies with confidence.
The seas may be stormy, but with agile strategies and the right financing partners, mid-market firms can not only stay afloat – they can chart a course to long-term success.
FAQ
How can private credit improve not just liquidity, but strategic positioning in a volatile market?
Private credit can be more than a financing solution—it’s a strategic lever. By securing flexible capital early, mid-market companies can act decisively in moments of disruption—such as acquiring distressed competitors, expanding into tariff-free zones, or investing in supply chain technology. The ability to deploy capital quickly allows you to lead, not just survive, during economic and geopolitical shifts.
With trade policy so unpredictable, how do we future-proof our financing strategy without overextending ourselves?
Start by mapping your exposure to potential tariff scenarios and build a flexible capital stack around it. Combine traditional bank lines with committed private credit facilities that can scale when needed. Look for lenders who understand your industry’s volatility and can structure tranches or accordion features to match your growth or protection needs. The goal is to avoid scrambling for funds when it’s already too late.
Should we use private credit now or wait until the next disruption forces our hand?
Waiting until you're under pressure weakens your negotiating position and narrows your options. Instead, approach private credit proactively—when your balance sheet is stable and your goals are strategic, not reactive. This positions you for better terms, longer runway, and control over timing. Think of it as securing fuel before the storm, not during it.
Disclaimer
This article is for informational purposes only and does not constitute financial, legal, tax, or investment advice.
Klar Capital makes no representations or warranties regarding the accuracy, completeness, or suitability of this content for any specific situation.
Readers should conduct their own research and seek advice from qualified professionals before making any business, financial, or investment decisions.
The strategies and insights discussed may not apply to all companies or circumstances.
Klar Capital disclaims any liability for losses or damages resulting from reliance on the information provided.
Use of this content is at your own risk. References to specific financial products or market trends do not constitute endorsements or investment recommendations.