Tariffs have put Pashion Footwear’s growth plans on hold
Pashion Footwear, a direct-to-consumer shoe brand whose products convert from a high heel to a flat, was preparing for 2025 to be a major growth year. After making a 19% profit last year, Pashion was putting the final touches on its first wholesale agreement, and it was preparing to secure a big loan from the U.S. Small Business Administration. Then, in the early spring, tariffs hit the brand, which manufactures in China.
Pashion, which had been paying no tariffs under an exemption known as de minimis, soon found itself paying a duty of 145% to bring in its shoes. Though this rate has since come down — and only temporarily — Pashion is still paying anywhere from 36-75% to import its products. It’s had to pull back on inventory orders, trim its number of styles and up its prices. And, in another turn of events, it’s become “virtually impossible” for the business to raise money and expand into wholesale, CEO and founder Haley Pavone told Modern Retail.
Both lenders and retailers are requesting financial projections from Pavone and asking how much her products cost to produce. However, her math is changing along with the tariffs; any new rates render her existing calculations obsolete. It’s a dizzying game to keep up with and one that jeopardizes the certainty that businesses like hers need, Pavone stressed.
When the U.S. announced tariffs on China in February, “I spent four hours redoing our financial model,” Pavone said. In the coming days, she said, rates changed again. “People are asking me for updated financial performance, but … until I know what my tariff rate is, it’s a fruitless effort.”
Pavone is one of many small business owners struggling to grow their businesses amid fallout from tariffs. Small businesses tend to have tight margins, and many see the ever-changing tariffs as a threat to their ability to survive, much less thrive. More than half of small business owners expect U.S. trade policy to negatively affect their businesses, according to CNBC. Already, some brands have raised prices, enacted hiring freezes or held special promotions to boost cash flow.
One way brands like Pashion have tried to stay afloat is by securing loans or raising funding. But many banks — worried by the collapse of Silicon Valley Bank and others — have been “pulling back” from lending to small businesses over the past several years, noted Ben Johnston, the COO of Kapitus, a small-business lender and marketplace. Interest rates are also higher than in years past. All of this creates a tough economic environment, even before tariffs enter the picture.
Pashion previously raised some $4 million through angel investors. In the first quarter of 2025, Pavone was close to securing a $5 million SBA loan. However, the deal “got yanked” after the Donald Trump-led SBA changed the rules for loans, Pavone told Modern Retail. The SBA now restricts loans to small businesses where 100% of shareholders are verified as U.S. citizens, U.S. nationals or lawful permanent residents. At Pashion, 1.7% of the company is owned by foreign investors.
To try to raise money elsewhere, Pavone has met with 40 lenders in the last two months. Many have requested a 10-year projection when it comes to Pashion’s cost of goods. But Pavone is unsure what costs will be in a matter of months, much less a decade, due to tariffs. “That’s a challenge that I think a lot of people are underestimating. For businesses that are trying to close funding, how are you supposed to do that when you can’t answer basic financial questions about your own business?” she said.
Pavone has run into the same issue in her conversations with wholesalers. A contract she was about to sign has been put on hold because of unknowns around long-term costs. The deal could have brought in an extra $10 million a year in wholesale purchase orders, Pavone said. “That alone would have doubled my business overnight.” Pashion has some styles on Nordstrom.com through a dropship model, but it does not have a larger wholesale relationship with Nordstrom or any other department store, the brand told Modern Retail.
Pavone said that bankers and retailers are ultimately understanding of what she and other small businesses are going through. “No one’s mad” that she can’t answer questions around funding or costs, she said, and that’s a source of consolation. Still, Pavone added, “It doesn’t change the fact that you can’t do business like this.”
“[Tariffs] have just put everyone in limbo,” Pavone said. “We’re all just very frustrated and very confused, and no one can move.”