Navigating an Election Year: Business Owners Remain Optimistic While Bracing for Potential Policy Shifts

KeyBank’s updated poll, which surveyed small business owners with annual revenue of $10 million or less,¹ found there is increased optimism — albeit cautious — about the economy leading into the presidential election. However, many small business owners are taking a “wait and see” approach to the economy. Taxation, challenges associated with interest rates, and fraud also remain top of mind.

Confidence and Financial Stability Have Increased

KeyBank’s latest Small Business Flash Poll found 72% of business owners feel confident that they could fund their operating expenses for one month with the cash they have in reserve for if an unexpected need arose, up from 64% in March. The poll found another sign of stability: The majority of business owners (75%) do not foresee hiring cuts over the next year. In fact, 1 in 3 (32%) business owners expect to grow their staff in the next 12 months.

'Wait and See' Approach

Election years often bring heightened uncertainty for business owners, who must navigate potential policy shifts that could significantly impact their operations. More than 3 in 5 (61%) of surveyed business owners plan to hold off on making major business decisions until after the election results are clear, underscoring the impact political and economic uncertainty have on business strategy.

As the economic and political landscape evolves, many business owners are actively preparing for the possibility of new regulations, tax changes, and trade policies that could shape their business futures. Nearly half (45%) of business owners anticipate that changes in taxation will have the most significant impact on their businesses. This is followed by concerns about the regulatory environment (34%) and trade policies (31%). Just 15% of business owners say they are not making any significant changes in anticipation of the election.

Since our initial poll in March, business owners' concerns about potential policy changes have shifted notably. While taxation remains the top concern in both periods, its importance has increased from 38% in March to 45% in September.

To prepare for potential post-election policy changes, business owners say they are focusing on increasing cash reserves (38%), delaying major investments or expansion (36%), and diversifying product or service offerings (31%). Less than a quarter (15%) of business owners indicated the election has no bearing on their major business decisions this year.

Interest Rates Have Posed Challenges

Business owners report facing reduced profit margins (38%), increased borrowing costs (37%), and deferred capital investment (31%) due to high interest rates. Our flash poll found cuts are welcomed, with more than half of respondents (56%) expecting interest rate changes to positively impact their businesses in the next 12 months.

Additionally, business owners plan to increase cash reserves (43%), reduce reliance on debt (36%), and diversify funding sources (32%) as they continue to adapt to the rate environment.

Fraud Remains a Concern, but Prevention is a Challenge

Business owners are increasingly focused on fraud prevention to protect their operations. Payment fraud (49%) and identity theft (29%) remain the biggest fraud concerns for business owners, in line with findings from earlier this year (44% and 37%, respectively).

Still, implementing effective fraud prevention measures presents significant challenges for business owners. The primary obstacles include the high cost of implementation (47%), a lack of technical expertise (42%), and time constraints (39%). These challenges underscore the complexities involved in establishing robust fraud prevention systems.

What This Means for Business Owners

Business owners need to be thoughtful about how political policy or interest rate changes can impact their operations and finances. Though many may wait to enact changes until the political and economic environment becomes clearer, planning for all outcomes is imperative. It’s never a bad idea to work toward increasing cash reserves during times of uncertainty. Contingency planning on pricing strategies and investments/expansion based on the outcomes in the coming months are also beneficial. 

Banks are at a pivotal moment to help their business clients navigate cash flow and business operations concerns. Working with a trusted banker can ensure small business owners have the resources they need to prepare for whatever lies ahead.

Running a business is never business as usual, and KeyBank can help you navigate challenges and opportunities throughout all business and political cycles.