BPO Sector Legislative & Macro-Economic Update

Ephor Newsletter Q3 2025

Well, the obvious statement as we move into the 2nd half of 2025 is simply: a lot has changed and a lot will change, relevant to the macro-economic and favorable legislative operating environment for small businesses and their stakeholders. The change in the macro façade will be quite favorable in the near-term as we migrate away from the policies of the Biden Administration to the capitalistic initiatives of the 2nd Trump Administration. 

 

Due to my work as a senior advisor to CPAC, the Dept of Commerce and as a “Special Envoy” to the White House on small business affairs; as we committed, in this newsletter we are providing a Legislative Update, and a Macro-Economic Forecast for the BPO sector:

  • The Big Beautiful Bill (“OBBBA”) & its positive effects & outcomes on small businesses.

  • A macro-economic analysis & outlook for the near-term for our sector.

OBBBA: (“The Big Beautiful Bill”)

  • The OBBBA Bill, not only at the individual tax level, is transformative which includes making the Tax Cuts and Jobs Act (“TCJA”) of January 2018 permanent (for now) with inflation adjustments, while temporary raising the State & Local Tax ("SALT”) to $40,000, from $10,000, through 2029. Of special note for our peers who own “pass thru” taxable entities (LLC’s: “S” corps etc.) most of the individual level tax breaks will “flow thru” to your individual tax returns.

Specially to small businesses the positive “highlights” of the OBBBA Bill include:

  • Pass Thru Entities: owners or shareholders of pass-through entities are currently taxed at their individual tax rates, less a 20% deduction (to lower the rate) for business-related income, subject to certain wage limits and exceptions. OBBA now makes this deduction permanent pursuant to Section 199A of OBBBA.  

  • Tax Exclusion on Small Business Stock Sale per Section 1202: provides an exclusion from gain upon the sale of "Qualified Small Business Stock" (QSBS). Basically, the amount of gain you can exclude from federal income tax when selling QSBS depends on the date you purchased it and the “hold period” of the stock: specifically:

    • OBBBA provides for a tiered system for section 199A stock: 50% for stock held for at least three years, 75% for stock held for at least four years, and 100% for stock held for at least five years. Additionally, the exclusion limitation increases from $10 million to $15 million, adjusted for inflation.

  • The 100% bonus depreciation provision is made permanent. The section 179 expense provision limit is boosted to $2.5 million, indexed for inflation, with a phase-out beginning at $4 million.

    • Expensing of Purchased Assets in Current Period (known as the Bonus Depreciation Provision) OBBA provides for a “bonus depreciation” of purchased assets in the current period versus pre-OBBBA which was based on the useful life of the asset. 

  • Research and Development Credit. Under current law, then R&D credit allows businesses to write off qualifying R&D expenditures, but they must amortize those costs over five years.

    • Under OBBBA, full expensing of the cost in the current tax year, domestic R&D expenses is now permanent.

Note: it is Ephor’s strongest guidance that all small business owners & CEO Entrepreneurs should seek competent tax counsel & advice should you have questions, concerns, or seek clarity on these tax issues.

 

Clearly the first 4-5 months of the Trump Administration and the Small Business and Entrepreneur Team have been focused on more transformational initiatives as presented above. As we look ahead to the next 6-8 months this teams focus will be on more “tactical day to day issues” such as less regulatory reporting especially related to labor issues, facilitating easier access to government “growth capital sources”, less regulation on customer service and call center compliance, and providing incentives for increased Global Business Services international trade, etc. Stay tuned! 

 

Macro- Economic Updates and Commentary: 
In general, the macro-economic environment is getting increasingly favorable for asset-light service businesses & will remain so in the near term. A few of the more favorable factors include:

  • Market Growth: despite the improving and favorable economic indicators (which historically have sequestered sector growth) all the “forecasters” are predicting revenue growth to be consistent in the 8%-10% growth rates through 2027. This will be driven mostly by labor supply demand imbalance, and the decreasing cost of capital in the near-term.

  • Interest Rates: interest rates will decrease ratably over the next 5-6 quarters mostly due to:

    • Once the “Product Oriented Tariffs” disruption clears & resets the “country-to-country circular flow of wealth”. It is logical that in the longer term, a more “equality-based trade costs” will de-risk the economy.

    • Stabilizing the Middle East and settling the Ukraine/Russian conflict lowers global risk profiles.

    • Lower Inflation, combined with The Federal Reserve System ratably reducing Interest rates over the next 4 quarters, will drive increased business investment, and promote consumer spending.

    • Ephor’s economist suggests that interest rates for small businesses could approach <6% levels by Q2 2026.

  • Availability of Capital for Small Businesses: the Trump Small Business Team is in the final stages of formulating programs that will make growth capital more readily available for asset light service businesses. Some examples include: expansion of the SBA Caplines LOC Program: longer term debt repayment plans: “Balloon” payment Loan structures, etc. 

  • Enhancements to The SBIC Program (Small Business Investment Corporations) are reviewing proposals which will expand its capabilities to include “complete balance sheet” structured financing venues.

In the short term, and until these programs get deployed; Ephor’s guidance is that should you have financing needs and want to preserve “equity” that you consider the various Mezzanine Funds that support our sector. 

For additional information on Mezzanine Fundas & other government initiatives for small business, please feel free to contact us below.

In conclusion, as we go about taking full advantage of the Economic and Legislative environments and achieving our objectives in 2H 2025, we in the sector have a unique opportunity that we have not had for nearly 5 years now since pre-COVID.

 We at Ephor could not be more excited and optimistic about the near-term future for our sector and its participants. Over the past 25 years we have seen a lot, learned a lot, and have dedicated our professional lives to creating Shareholder Wealth from small and emerging businesses just like yours. We would love to hear from you.

Best to you and yours in Q3.

Garry E. Meier

Strategic Practice Lead

Ephor Group, Inc.