13 May What Might Entrepreneurs Make of Market Volatility and How Should They React?

By Mike McAdams, President, Pasadena Private Lending

At Pasadena Private Lending (PPL), the team and I have decades of experience through many prior economic and market cycles. But while I will share experiences, wise or “otherwise” further down in this piece, in all candor, one absolute conclusion is each market and economic bump is different in some way and each company is impacted differentially so there is no one strategic prescription.

First, for the stock market investors reading this, I will feed your need for comfort and clarity by referring you to the excellent recent client update from our affiliate firm, Pasadena Private Wealth, and my colleague, their Chief Investment Officer, Simon Holford. (This information is not provided as a solicitation nor as a recommendation to buy or sell any securities.) To access Simon’s thesis and more, click here.* His feedback is consistent with a long-term view that “this too shall pass,” that his clients’ portfolios have been positioned to weather the storm, and they are ready to reenter the market as they see signs of a turn, hopefully later in the year.

In terms of a core economic view, note that at PPL we are not economists. But before the talk of tariffs were introduced , we saw a good-not-great economy with an overhang of a large federal debt keeping interest rates higher than would otherwise power the “great” economy we all were hoping for. No one knows where the tariff negotiations will end and clearly some industries will be impacted more while the impact on consumers is yet to be seen. We are therefore cautious in the short run and remain optimistic for 2026 and beyond.

As for the everyday effort of running a business in this uncertain climate, here is a summary of PPL’s collective wisdom:

1. Of course, be mindful of tariffs on inputs and end-product sales issues. Experts tell us tariffs are more likely to be applied less broadly and in smaller percentages in the long run as more of a means to other ends. As a result, be cautious in establishing new lower-cost sourcing against damaging key historic relationships. Raise prices to protect margins where you must and communicate to customers, as they are likely feeling the pinch, too.
2. Communicate with your management team and/or employees. They also listen to the news and may be worried. Let them in on your concerns and your plans. Ask for suggestions and openly discuss options and key decisions. Abrupt strategy changes, or failure to act, can undermine the faith they have in you.
3. Look at everything you do… again. Yes, you have thought about every aspect of the business every quarter since its founding. But do it again. Do it backwards from shipping to product design instead of the other way around this time. Do it by department. Walk the shop floor. Ask people what their biggest work problem is. Ask what works best and how that solution could be applied elsewhere?
4. Build a reserve. In the company or as the owner in your personal account, make sure you have 3-5x your normal reserve of cash in case things get tough. Or in case your ‘reliable bank of 11 years pulls your line of credit’ for whatever reason (it happens). Start shopping for a new (larger) credit facility the moment your lender gives you a sense that they are getting uncomfortable with your loan. In today’s still intensely regulated banking marketplace, look to non-bank private lenders (like PPL) who can make decisions based purely on your credit vs. the complex rules forced on most traditional bank lenders.
5. Communicate with your financial partners. Further to #4, all lenders (both non-banks and traditional banks) appreciate over-communication from a borrower. And don’t forget to communicate with your minority partners as well as important vendors in uncertain times.
6. Now is the time. If you have been doing everything right, have the resources and have been sitting on a growth plan waiting for the right time to launch it, you might even feel “cocky” now! That is, while all your competitors are being cautious, maybe it is time to expand your product line or enter a new market or sales territory. If you have that sort of story and a growth plan, PPL would is interested in seeing your plans and exploring the possibility of being your lending partner.

In summary, getting through unexpected shocks requires stepping back and looking at everything you do as objectively as possible, despite having done it before and seemingly always looking for new and better ways to do things. It could also be finally deciding to “go big” when others are “hunkering down” (if you have the expertise and financing).

It might also be continuing to do all the little things that have worked so well for years. That is, just like doing what it takes to maintain (aging) bodies, it is often about doing all the little things we know we should do over the years. That way, should an unexpected setback occur, (both you or) your business will have the core resilience to persevere and become stronger than ever.

Should you have any questions, we invite you to contact us and explore how PPL can assist you in your entrepreneurial journey.

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