Looking Back on 2025: Business Sentiments & Deals Align

A new year is a time for reflection, planning, and gratitude.

To that end, looking back at our second year in business, it was a success — overall business activity was high; several clients engaged Foothills Capital to secure capital; and I am excited by the momentum we are carrying into 2026. I am deeply grateful to our clients, referral partners and lending partners for the trust placed in Foothills Capital.

By the numbers, we recorded:

• over 1100 Calls or meetings with various partners and/or clients

• 63 potential client referrals

• 8 signed client engagements

• 4 engagements that resulted in a signed term sheet or funding. . . and counting

Numbers aside, it is the nature of the conversations with partners and clients over the course of the year that tell the real story. Allow me to elaborate…

Sunny Optimism Gives Way to Uncertainty

Early in the year, business sentiment was very positive. The stock market was booming and the financial press reported that business confidence was strong. My conversations with middle-market private equity sponsors and dealmakers pointed to strong deal flow and expectations for a meaningful increase in deal activity over the prior year. M&A advisors were reporting a favorable deal environment: sellers were eager to go to market; buyers had an abundance of capital to deploy and buyers were bullish on the economy.

That optimism shifted abruptly in early April, when the White House announced plans for reciprocal tariffs at levels that were both unprecedented and applied broadly, including to our largest trading partners. This policy-driven shock did more than affect interest rates or capital availability—it undermined confidence. Decision-making slowed across the board.

Clouds Lift, but Sentiment Diverges

As new trade agreements were announced and tariff levels came down to more manageable ranges, uncertainty began to ease. The capital markets resumed their bullish climb while market participants reported that M&A activity accelerated. Though the market was broadly positive, that sentiment was by no means universal. Financial press often referred to prevailing conditions as a “bifurcated”, or “K-shaped” economy.

On the consumer side, economists and companies reported strong consumer spending driven by affluent households. Economists attributed this strength to the “wealth effect” from caused by these consumers’ benefitting from higher stock prices and equity in their homes.

Meanwhile, middle- and lower-income consumers, with limited savings and disposable income, continued to feel pressure from higher everyday costs and incomes not keeping pace.  As a result, these consumers were feeling financial pressure, which was a marked departure from the pandemic when consumers received generous government support and wages were increasing rapidly to attract workers.

Businesses experienced a similar divergence. Those that catered to affluent consumers or in sectors that were in high demand (AI technology, data center and digital infrastructure) felt confident. On the flip side, businesses that served middle-income consumers, or those that faced challenges because of secular shits in the economy and higher costs, struggled. The challenged sectors included construction, commercial offices, housing, manufacturers/distributors affected by tariffs and businesses that provide goods and services to middle/lower end consumers cutting back on their spending.

On the credit front, given the economic backdrop and banks still adjusting to normalized interest rates, access to credit remained tight just as it had in 2024. As a result, more businesses experienced capital constraints, strained cash flows and there were more credit events - including loan workouts, loan defaults, and increased receivership and bankruptcy filings .

Foothills Capital Activity in Context

Our own activity reflected these cross-currents. The year began exceptionally busy, with borrowers and sponsors eager to take advantage of positive business sentiment and execute on their strategic plans. At the beginning of the year, I had numerous discussions with consumer-facing companies seeking capital to support large customer purchase orders for the spring and summer season. We also engaged with private equity clients preparing to finance acquisitions or support portfolio company growth.

That momentum slowed during the spring and early summer as tariff concerns and broader policy uncertainty caused many stakeholders to pause. While Foothills Capital closed two PE deals for clients in the second quarter, they were both initiated in the first quarter before the policy shock. Throughout the summer, I continued to have many conversations with partners and prospective clients about various companies’ capital plans, but principals were reluctant to commit until the fog of uncertainty cleared.

As summer ended and we entered the fall, activity picked up again driven by improved visibility, pent-up execution needs, and renewed urgency around capital planning.

The divergence in the economy was reflected in the nature of our client engagements as we head into 2026. On the growth side, we are advising companies unaffected by tariffs that are pursuing transformative acquisitions or are seeking capital to fund significant growth initiatives. Meanwhile, I am actively working with several businesses facing cash flow and margin pressures due to softening demand and stubbornly high wage and material costs and therefore need capital alternatives to conventional bank credit.

Looking Ahead

As we enter into 2026, I am energized by the momentum achieved last year.  I expect the trends driving a bifurcated economy to continue, with pockets of growth and stress.  

No matter the economic environment, our focus remains unchanged: helping middle-market businesses and their stakeholders secure the right capital, at the right time, with the right structure and terms.  In private and specialty credit, capital solutions are rarely one-size-fits-all and the landscape is evolving rapidly. Hence, the outlook for capital solutions expertise remains sunny.

Cheers to a healthy and prosperous 2026 and look forward to working together in the year ahead.