Tariffs and Trade Pressures: How ABL Helps Consumer Brands Protect Margins

Consumer brands are operating in one of the most challenging environments. Tariffs, shifting trade policies, currency volatility, and ongoing geopolitical disruptions have materially increased the cost and complexity of global sourcing. For PE-backed and growth-oriented brands, these pressures don’t just create operational friction, they directly impact gross margins, cash flow predictability, and enterprise value.

As costs rise and payment cycles stretch, financial agility becomes a competitive advantage. Brands with flexible access to working capital can absorb shocks, adjust sourcing strategies, and protect margins without slowing growth or turning to dilutive capital. Asset-based lending (ABL) has increasingly emerged as a strategic financing tool for management teams and sponsors seeking to preserve liquidity, defend profitability, and maintain strategic optionality in a volatile trade environment.

This article outlines the key cost pressures impacting consumer brands, and the strategic priorities required to protect profitability. It also examines how ABL helps brands navigate volatility by providing the flexible, reliable financing needed to safeguard margins and support growth amid persistent tariff and trade pressures.

The rising cost of global trade

For many consumer brands, international outsourcing has long delivered product affordability and margin efficiency. However, that equation is rapidly shifting. CEOs and finance leaders are increasingly concerned about cost spikes, delays, and supplier stability, and are uncertain how much of these increases can be absorbed, offset through efficiency gains, or passed on to customers without impacting demand.

Below are the key challenges facing consumer brands as shifting trade policies reshape the economics of global sourcing:

1. Tariffs and import duties are rising: From textiles and footwear to electronics and home goods, tariff impact has escalated landed costs across multiple sectors. These increases directly erode business margins by inflating input costs, leaving consumer brands with limited room to protect profitability without raising prices and risking competitive backlash.
2. Currency volatility adds unpredictability: Fluctuations between currencies introduce margin risk between order placement and settlement, compounding cost uncertainty in already thin-margin environments.
3. Shipping and logistics disruptions persist: Global congestion, container shortages, fuel price spikes, and new environmental regulations continue to drive transportation costs higher. Longer lead times force brands to carry excess inventory, increasing carrying costs and tying up working capital.
4. Supplier terms are tightening: Manufacturers facing their own cost pressures are demanding faster payments, deposits, or stricter terms, placing additional strain on brands already managing stretched cash conversion cycles.
5. Retailers are extending payment terms: Major retail partners increasingly dictate 60, 90, or 120+ day terms. Brands must pay suppliers well before receiving customer payments, widening working capital gaps and further compressing margins.

Together, these converging pressures lengthen the cash-to-cash cycle and place sustained strain on liquidity, requiring more agile financial strategies to protect margins and profitability.

Strategic priorities to protect margins

To protect margins and sustain value during periods of trade volatility, leadership teams must balance operational discipline with financial flexibility. For sponsors and boards, this means prioritizing strategies that preserve liquidity, reduce downside risk, and enable decisive action when costs or supply chains shift unexpectedly.

Together, the following priorities form a practical roadmap for navigating trade pressures while protecting margins and enterprise value:

1. Strengthen cash flow visibility and forecasting: Improved visibility allows leadership teams to anticipate funding gaps and address them proactively, reducing reactive decisions that often lead to margin erosion.
2. Diversify supply chains and sourcing options: Expanding suppliers and geographies improves resilience and reduces exposure to cost spikes or disruptions concentrated in a single market.
3. Strengthen supplier relationships: Collaborative partnerships can unlock more favourable terms, including early-payment programs, extended payment windows, or volume-based pricing stability.
4. Implement hedging and cost-stabilization tools: Currency hedging, forward contracts, and price-lock agreements help protect margins from foreign exchange volatility and commodity swings.
5. Develop adaptive inventory and logistics capabilities: Real-time visibility tools, diversified routing, multiple carriers, and adaptive inventory strategies help reduce excess costs and limit exposure to long lead times.
6. Build agile financial structures: Flexible revolving credit facilities provide liquidity buffers and fast, easy access to working capital, enabling brands to respond quickly when costs spike or shipments stall.

Building agile financial structures is foundational, providing the liquidity and flexibility needed to execute the other five strategic priorities effectively.

Building agile financial structures

Cash flow forecasts only create value when a business has the liquidity to act on them. Supplier diversification, inventory agility, and currency protection all require capital and the ability to deploy it quickly. Agile financial structures ensure brands have access to working capital when and where they need it, enabling faster decisions to protect margins in volatile conditions. In an environment of tariff volatility, flexible financing becomes essential to absorb working capital strain without slowing operations or sacrificing growth.

Traditional bank financing often lacks the flexibility to support companies through rapid cost swings or trade disruptions. As a result, alternative financing has become increasingly important. For many consumer brands, leading fintech specialty lenders have emerged as preferred partners, offering tailored facilities designed to maximize credit availability, funding speed, and flexibility. Asset-based lending (ABL) plays a central role in building these agile financial structures.

Real-world example: ABL supporting trade-driven cost pressures

A U.S.-based consumer products distributor was experiencing strong growth but faced rising landed costs, extended lead times, and tighter supplier payment terms driven by global trade pressures. Management needed a financing structure that could support inventory availability and upcoming product launches—without introducing restrictive covenants or requiring incremental equity support.

eCapital provided a $6MM asset-based lending facility secured by accounts receivable and inventory, along with a short-term overadvance to increase near-term flexibility. This structure expanded liquidity precisely when working capital demands peaked, allowing the company to purchase inventory ahead of price increases, meet supplier requirements, and sustain momentum across key product lines.

As a result, the business preserved margins, avoided operational disruption, and maintained growth without compromising its capital structure, despite continued trade volatility.

How ABL helps consumer brands navigate tariffs and trade pressures

Asset-based lending (ABL) provides revolving credit facilities secured by accounts receivable, inventory, and, in some cases, intellectual property. Because borrowing bases adjust with asset values, ABL is inherently more flexible and scalable, making it well-suited for volatile operating environments.

Here is how ABL protects margins:

1. Unlocks operating capital

ABL converts receivables, inventory, and intellectual property into immediate working capital, enabling brands to:

• Pay suppliers on time—or early—to secure favourable terms
• Absorb rising logistics costs without delaying production
• Avoid stockouts during critical selling seasons
• Maintain consistent output despite higher input costs

This liquidity helps prevent forced decisions that erode margins.

2. Provides scalable funding

As inventory and receivables grow, borrowing capacity grows automatically. This allows consumer brands to:

• Increase order volumes ahead of cost increases
• Negotiate bulk or early-buy discounts
• Build buffer inventory to protect against disruptions

Scalability preserves margins during periods of cost volatility.

3. Enables stronger supplier negotiations

Reliable liquidity allows brands to negotiate from a position of strength, helping secure:

• Better pricing
• Priority production slots
• Preferential shipping allocation

Improved terms directly protect margins.

4. Accelerates liquidity and enhances cash conversion

Extended retailer terms create significant cash flow gaps. ABL shortens the cash-conversion cycle, ensuring brands maintain liquidity even as customers delay payments.

Faster access to capital safeguards margins that might otherwise be lost to delays, penalties, or emergency financing.

5. Offers covenant-light flexibility during volatile conditions

Specialty ABL facilities typically feature minimal financial covenants, reducing the risk of defaults triggered by temporary cost spikes or margin compression. ABL is:

• Less dependent on EBITDA
• Less affected by temporary margin compression
• Better able to avoid defaults triggered by temporary cost spikes

This stability protects brands from restructuring costs, operational disruption, and emergency measures.

Building resilience for the future

By providing a stable, scalable working capital foundation, ABL enables consumer brands to protect margins, absorb rising costs, and maintain operational momentum. It supports not only today’s tariff pressures but also long-term resilience in an increasingly unpredictable global trade environment.

Conclusion

In an environment defined by tariff uncertainty, rising logistics costs, and extended payment terms, financial flexibility is no longer optional it is foundational to value preservation. Consumer brands that rely solely on traditional credit facilities may struggle to respond quickly when costs spike or when working capital cycles widen. As tariff volatility continues, maintaining financial flexibility is critical to preserving margin protection and enabling rapid adjustments to sourcing, pricing, and inventory strategies.

Asset-based lending provides a resilient, scalable working capital foundation that helps brands:

• Defend gross margins amid rising input costs
• Maintain liquidity as receivables stretch
• Support growth without diluting ownership
• Preserve operational and strategic optionality

For PE-backed brands and growth-oriented management teams, ABL is not just a turnaround solution – it is a strategic financing tool that supports margin defense, cash flow stability, and long-term value creation.

Contact us to learn how ABL can strengthen your working capital, protect your margins, and help your brand stay competitive in any market.

Key Takeaways

• Tariffs and trade pressures directly impact margins for consumer brands reliant on overseas manufacturing and long supply chains.
• Converging cost, payment, and logistics challenges widen working capital gaps and strain liquidity. To navigate these constraints, companies must focus on financial stability and flexibility to maintain resilience, fuel growth, and protect profitability.
• For many consumer brands, asset-based lending (ABL) has emerged as a preferred solution for building agile, resilient working capital structures that protect margins and support growth.