Midyear Perspective: Adapting to a Changing Market
As we reach the midpoint of 2026, one word continues to define the business environment: change.
Change is the new norm. The pace and nature of that change may be different than what we’ve experienced over the past few years, but businesses continue to face new challenges, shifting priorities, and evolving market conditions. The companies that are thriving are not necessarily the biggest or the fastest-growing; they’re the ones that remain flexible, adapt quickly, and make decisions when opportunities present themselves.
Midyear Review
From a new business standpoint, the first quarter was relatively slow. Many companies remained cautious and delayed making financing decisions. But new business activity has been improving. The second quarter was noticeably stronger, and we’re seeing that momentum continue into the third quarter.
That said, uncertainty still exists.
We’re finding that many prospective borrowers:
- Have competing priorities.
- Take longer to make decisions.
- Request proposals quickly, sit on them for weeks, then want quick closings.
One noteworthy trend we’ve seen this year is a significant increase in business owners exploring the sale of their businesses. In many cases, financing decisions are being postponed while owners determine their long-term plans.
A Different Set of Challenges
When we look at issues businesses are facing today, for the most part, we haven’t heard much about tariffs or supply chain disruptions as was the case last year. Today, those concerns have largely faded. Instead, business owners are talking about:
- Inflation.
- Fuel prices.
- Higher operating costs.
- Access to working capital.
The encouraging news is that most companies we’re evaluating aren’t struggling. Many continue to perform reasonably well despite economic pressures.
Structure Has Become More Important Than Price
One of the biggest changes we’ve encountered this year involves how borrowers evaluate financing options. Historically, pricing was the primary consideration. Companies focused heavily on rates and fees. Today, the conversation is different. Borrowers are asking: “How much availability can you provide?”
Deal structure has become increasingly important because companies want:
- More working capital.
- Greater flexibility.
- Higher advance rates.
- Financing that supports growth.
In many situations, the lender that can provide the most availability wins the deal, even if their pricing isn’t the lowest. That’s a significant shift from years past.
Equipment Values Are Creating Challenges
We’ve seen a number of equipment appraisals come in lower than borrowers (and we) expected, which has also slowed down several transactions this year.
When that happens:
- Availability decreases.
- Deal structures must be adjusted.
- Closings take longer.
It’s frustrating for everyone involved and has become a more common challenge than we’ve seen in recent years.
Referral Sources Continue to Evolve
Another change we’ve noticed is where our opportunities originate. Historically, banks generated the vast majority of our referrals. Today, that’s no longer the case.
While we continue to enjoy and appreciate strong relationships with our banking partners, a growing percentage of our opportunities now come from:
- CPAs.
- Consultants.
- Turnaround professionals.
- Attorneys.
- Investment bankers.
- Direct referrals from our website.
Whether bank portfolios are cleaner or institutions are working more aggressively with challenged borrowers, we don’t know. What we do know is that our referral mix has changed.
Team Updates
In my January Letter, I mentioned that we were actively looking to expand our sales team.
I’m pleased to report that we’ve added two senior Client Development Officers:
- Steve Trefzger, who handles our Pacific Northwest territory: WA, OR, ID, MT.
- Mike Haas, who handles our Mountain West territory: AZ, CO, NM, UT.
We also welcomed a new member to our Administrative Team.
Looking Ahead
The uptick in new business quarter-to-quarter is encouraging. The opportunities are there, and our pipeline remains strong. The question isn’t whether businesses need capital. The question is how quickly they’ll decide to move forward.
I expect the second half of the year to be active. Inflation and rising costs continue to put pressure on marginal businesses, which should increase demand for working capital and asset-based lending solutions structured to meet their specific needs.
As always, we’ll continue helping companies navigate change, access capital, and position themselves for future growth.
Thank you for your continued trust and support. I wish you a successful and productive second half of 2026.
Mark Hafner
President & CEO
Celtic Capital Corporation
