As persistent demand challenges, cautious technology spending and new restrictions on small business lending force small business founders must operate with greater discipline and agility.
Small business owners remain generally confident about the macro environment with a 6.8 score out of 10 on the SBE Small Business Index. The SBE Small Business Index is based on growth confidence, customer demand, economic outlook, operational stability and technology impact. A 6.8 index score indicates a balance between high confidence and constraint, according to the 2026 State of Small Business report from Small Business Expo.
The score reveals a cautious approach to growth rather than full steam ahead, which surveyed 11,426 US small business owners,
A majority of respondents (82.2%) say they are confident their businesses will grow in the next six months as they remain agile within a constrained economy, according to the report.
While the report does not track startups specifically, it paints a detailed picture of the conditions that startups are operating within. When growth happens, it’s incremental and measured while spending is approached with caution and tied to near-term outcomes rather than future-proofing.
Customer demand is the primary constraint
Customer demand, not inflation or hiring, is the primary challenge facing small businesses, with more than half (53.3%) of respondents citing it ahead of cost pressures, staffing challenges or capital access, per the report.
Notably, the struggle to maintain a strong customer pipeline within a strained economic environment stretches across the small business landscape regardless of confidence levels, according to the report.
Yet owners’ confidence remains high, reflecting their ability and belief to operate within constrained conditions, per the report.
In practice, the data suggests small businesses are prioritizing products and services that support customer demand and operational stability, rather than initiatives that are less directly tied to near‑term business needs
Growth is disciplined, not expansive
While owners feel confident, the report shows little evidence that they’re aggressively scaling. Wherever expansion exists, it’s happening slowly and cautiously, while maintaining current staffing levels and hiring decisions linked to realized (not projected) demand.
Inflation for businesses large and small is a pressure point – but most small business owners describe it as a moderate (versus severe) impact. Only 17.7% report severe inflation impact, suggesting that a majority of owners have adjusted their pricing, operations and supplier relationships to absorb higher costs, according to the report.
The current environment for small businesses rewards restraint, selective spending and investments in stability or efficiency.
Capital access emerges as a constraint
Even as customer demand remains the top operational challenge, access to capital plays a crucial role in the growth for many small businesses – particularly for immigrant‑founded companies.
Earlier this year, the Small Business Administration revised eligibility requirements for foreign nationals applying for SBA‑guaranteed loans, preventing access to businesses that are 100% owned by US citizens or nationals.
The policy change impacts flagship programs such as SBA 7(a) and 504 loans, which are commonly used by small businesses and early‑stage food and beverage startups to finance equipment, facilities and working capital.
The rule change disqualifies legal permanent residents (green card holders) from an SBA loan. For capital‑intensive startups, the impact is immediate.
A legislative effort to restore prior standards
In response to the revised SBA eligibility requirements, Sen. Edward Markey (D‑Mass) introduced the Investing in the American Dream Act last month, which would restore previous SBA lending standards by establishing a 51% US citizen ownership threshold.
The bill would allow businesses with legal permanent residents, refugees or asylees as minority owners to once again access SBA‑backed loans.
Supporters argue the proposal would realign SBA lending with economic realities at a time when small businesses are already absorbing demand volatility and tighter operating conditions.
