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Small-Business Lending Shifts to Fewer, Bigger Loans

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Small-Business Lending Shifts to Fewer, Bigger Loans

Financial institutions are originating fewer small-business loans even as the total dollars lent increase.

Cash-flow underwriting and embedded lending offer ways to evaluate repayment capacity without relying exclusively on conventional credit histories.

Lenders that can distinguish short-term financial distress from viable investment opportunities may unlock more sustainable customer relationships.

The next big opportunity in small-business lending is the same as the last big opportunity.

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It is serving the smaller market and credit-thin business borrowers that banks have spent decades struggling to serve profitably.

In a new November joint release, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, and Office of the Comptroller of the Currency (OCC) released their annual data on small business, small farm, and community development lending. The Community Reinvestment Act (CRA) data, published by the Federal Financial Institutions Examination Council’s (FFIEC), spotlights a lending market in which the number of small-business loans is moving in a different direction from their aggregate value.

Nearly 9 million small-business loans, including originations and purchases, totaling more than $291 billion, were reported by institutions. But per the federal data, small-business loan originations fell 2% in 2025, even as the dollar amount originated increased 4.7%.

2% of lending dollars.



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