When the Supreme Court struck down President Donald Trump’s tariffs two months ago, many companies rejoiced at the prospect of returning to pre-tariff prices and the possibility of getting a refund back from the government. However, the ruling may have also created a $166 billion problem.
“Businesses are struggling,” said Alex Hennick, president and CEO of A.D. Hennick and Associates, a liquidation firm that specializes in distressed asset recovery. “The economy is tough right now. The cost of manufacturing is up, traffic is down, and retail sales are down. So this can be a situation where the company is struggling and they need this money in order to survive.”
He told Fortune, “It’s a situation where people are trying to be creative.”
Some companies can’t afford to wait. Instead, cash-hungry businesses are taking their tariff refund claims to the bank and using them as collateral for loans.
“If you need the cash flow in order for your business to grow, to survive,” Hennick said, “it’s something where you’re better off having it now and trying to make it than waiting.”
Many of these large companies hit hardest by tariffs—particularly those in the manufacturing and automotive industries, and retail and consumer goods—could see using refund claims as loan collateral as worth it, Hennick suggested.
Wes Harrell, a broker and head of a trading group at capital markets firm Seaport Global, told Fortune that in these instances, the loan-to-value ratio of potential refunds used as collateral might be about 50%, meaning a $10 million refund claim would be worth only $5 million as a loan. By comparison, companies selling the rights to their refund claims are doing so for about a quarter of their projected value.
According to Hennick, whatever decision companies make on how to leverage the refund claims comes down to their appetite for risk—but he predicts more firms than not will have to make tough choices, as opposed to simply waiting for refunds.
“It’s coming to the point where some people might have no choice,” he said. “They’re either going to have to sell their claim or they’re going to have to borrow money to get money in order to continue to operate their business.”
“As an importer, you’re still fully exposed to the timing of the legal process because you have, in effect, retained your rights to the full refund,” Harrell said. “You haven’t solved the problem. You’ve just financed it.”
As time goes on without definitive answers on refunds, Harrell sees more companies taking actions like selling the rights to their claims, preferring to pocket money now instead of waiting for a sum down the line.
“CFOs are going to prefer to have clarity and certainty around their capital,” he said, “as opposed to uncertainty on a contingent government receivable with no defined timeline.”
