Trump tariffs led businesses to take high interest rate loans

Some small businesses that must foot the bill for President Trump’s new tariffs are taking out high-interest-rate merchant cash loans and other types of debt to cover this additional cost.

And several business owners taking on this costly debt told CNBC they fear financial disaster because of it.

Companies that spoke to CNBC reported being offered predatory lending interest rates of over 30% to cover their costs related to the tariffs.

These people say their companies could be left in a deep financial hole even if the Supreme Court upholds lower federal court rulings that the new tariffs are illegal and orders the federal government to refund companies for taxes they’ve already paid.

US Customs and Border Protection Earlier this week, it announced it had collected more than $200 billion in tariffs this year as a result of new taxes imposed by Trump.

Some of the loans made are merchant cash loans and income purchase agreements, which are not regulated by the Federal Deposit Insurance Corporation and do not have to comply with federal lending standards.

FDIC, a Supervisory policy on predatory lendingHe declined to comment. The Consumer Financial Protection Bureau, which the Trump administration is trying to disband, did not respond to CNBC’s request for comment.

Josh Esnard, CEO of shaving products company The Cut Buddy, said he gets a lot of calls every day from lenders with high interest rates.

“They are being very aggressive and deceptive in reaching out both by phone and email,” Esnar told CNBC.

Esnard said even if the Supreme Court ruled the tariffs were illegal and his company was refunded, the money wouldn’t make Cut Buddy whole.

Esnard initially used three different lenders to pay his rates, and interest rates on merchant cash loans fell between 24% and 30%. CNBC reviewed these deals.

In order for the loans to be considered, Esnard paid underwriting fees totaling $30,000 in addition to the loans.

Esnard borrowed a total of $950,000 from three loans to pay a total of $800,000 in tariffs.

“I needed a $150,000 cushion for my payroll and overhead until I could get paid for my product from retailers and customers,” Esnard said.

“It’s going to take us five years to pay back this loan, so it’s still a loss.”

In one settlement, Esnard received a $250,000 loan but owed $325,000 in fees.

“I have to pay them back weekly,” he said, referring to the agreement.

Esnard recently received a financial lifeline through a loan to help stop high interest payments. Business Consortium FundFocused on minority-owned and small businesses.

The fund reviewed his high-interest loans and approved a new loan that would join Esnard’s payments.

“Instead of paying $35,000 a week, I will now pay $35,000 a month,” Esnard said.

“Yes, it is still high, but it is better than payments from predatory lenders,” he said.

“This saved my business from closing. We were literally talking to business brokers about selling the business.”

Cut Buddy, which appeared on the television show “Shark Tank” in 2017, sells its products online and at big box retailers. Walmart, Aim And CVS.

“2025 was going to be my highest revenue and net income year,” Esnard said.

“Not anymore, the tariffs killed it,” he said.

Joann Cartiglia, owner of Queen’s Treasures, a Ticonderoga, New York-based toy company that designs and creates historically inspired, handmade doll furniture, said she had to take out loans that changed her exit strategy from the business.

“We were planning to retire in two years,” Cartiglia, 64, said.

“My husband and I have invested most of our retirement money into this business, and now I have absolutely no hope of retirement,” she said.

Her company, which specializes in “Little House on the Prairie” dolls, furniture and clothing, was excited as the year began with the announcement of the reboot of the television series popular in the 1970s and 1980s.

But Queen’s Treasures had to raise prices for its “Little House” character Laura Ingall’s baby and other items due to new tariffs.

Limited quantity is also an issue across the range and sales are down 33% due to lack of stock.

“I now have loans to cover my business expenses,” Cartiglia said. “My credit score has now dropped and banks do not even look at me because of this low credit score. I have to borrow money from wherever I can.”

He described the loans his business paid out as “Mafia rates.”

“This rate is over 20%, obscenely high,” Cartiglia said. “It is very difficult to see lenders making record profits from a bad situation.

“This was supposed to be a year of development. Not now.”

Even if the Supreme Court rules the tariffs are illegal, he says it won’t solve the company’s cash flow problems.

“We are 100% in the hole due to a combination of reduced profit-making orders and business operations,” Cartiglia said.

“The money we paid in tariffs should have gone to business operations and building inventory for the holidays,” he said.

“I really feel like the government is putting me out of work. Tariffs are the anti-American Dream.”

Utah-based Village Lighting Co. said its duty bill on imports of 100 shipping containers it ordered this year is approaching $1 million.

“About 50% of our sales are locked in based on agreements with our customers, so we sold a lot of those items directly to them at a loss,” said Jared Hendricks, co-owner of Village Lighting, which has been in business for 23 years.

The company places holiday orders a year in advance; That means it doesn’t take into account the costs of Trump’s new tariffs, most of which were announced only in April.

“We kind of transitioned from working for profits to working for rates,” Hendricks said.

“We are working to pay off our tariff debt and then look forward to next year.”

Although his company was able to get a loan from the bank to cover tariffs and operational costs, the company was forced to raise prices and has seen a decline in sales since then.

“Modest price increases resulted in significant declines in sales, forcing us to discount products just to move inventory,” Hendricks said.

“At this point, it has become increasingly difficult to cover tariff costs through normal product sales.”

Hendricks also said potential refunds from the Supreme Court decision would not be a silver bullet solution for struggling businesses.

“This experience shows that tariffs are not sustainable,” he said. “Consumers cannot bear these high prices, and the burden falls entirely on the importer. This dynamic threatens the survival of businesses like us.”