Price pressures remain top of mind for many firms, fueling the desire to improve profitability through increased business efficiency. As a result, firms have signaled borrowing activity this year will skew towards funding technology upgrades, productivity enhancements, and expansion plans, despite elevated financing costs. This willingness to invest in strategically critical imperatives is reshaping capital allocation decisions.
The latest Principal Well Being Index indicates that price pressures remain a central concern for businesses. This is prompting firms to focus on extracting efficiency gains, particularly through technological innovation.
The Principal Well-Being Index measures sentiment among small- and medium-sized businesses by asking business decision makers about current conditions and the economic outlook. The most recent survey, conducted between January 15 and February 1, collected responses from 1,000 firms—on par with the NFIB Small Business Optimism Index in scale.
Results show that the cost of healthcare, employee benefits, and tariffs on foreign goods and materials remain significant concerns across firms of all sizes. In response, businesses are restraining job openings and keeping headcount broadly stable. Simultaneously, many are actively pursuing efficiency improvements, including borrowing to fund technology upgrades, productivity enhancements, and expansion plans, even as financing costs remain elevated. Notably, there is a growing sense of urgency: firms across sectors and size categories report a willingness to borrow at interest rates approaching 12% when investments are viewed as strategically critical.
That willingness points to a structural shift. The imperative to invest in growth while extracting efficiency gains through technology is reshaping capital allocation decisions. As a result, both small and large businesses are increasingly prepared to take on debt to finance investments in software, automation, and digital infrastructure, despite borrowing costs that remain well above pre-pandemic levels.
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About the Principal Financial Well-Being IndexSM
The Principal Financial Well-Being Index℠ (WBI) is recurring research used to track sentiment around repeated financial health measures and timely issues relevant to businesses.
Business owners, decision makers, and business leader participants who represent companies with between 2 to 10,000 employees (n=1,000) provide information by completing a 15-minute online survey. Access to sample is provided by ROI Rocket, a third-party research panel provider.
In 2025, the WBI added a formal index. The index number in the WBI is calculated by taking responses from 6 perceptual measures evaluating current financial health, financial comparisons year over year, and future projections for business and economic outlook. The percentages of respondents who answered positively for each measure are averaged and standardized to a 0-10 scale, with perceptions of business / company, local economic, and U.S. economic growth weighted 60%, 20%, and 20% respectively within their aggregate measure. Small businesses = 2–499 employees Large businesses = 500–10,000 employees.
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