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Small Business Lending Demand On Decline, KC Fed Survey

The Federal Reserve Bank of Kansas City small business lending survey points toward a decline in lending.

Posted October 5, 2023

Small business commercial and industrial lending continued to decline in the second quarter, decreasing 16.8 percent year-over-year and down 1.2 percent from Q1 2023, according to the Federal Reserve Bank of Kansas City.

The Fed released its small business lender survey last week with many respondents claiming business lending is currently “unconstrained by available liquidity.”

Respondents in the Fed’s small business lender survey showed a downward loan demand for the fifth consecutive quarter. Furthermore, respondents cited tight credit standards with lower credit quality and rising interest rates are consistent with the rate environment and lower lending.

Small business loans remained relatively flat quarter-over-quarter as C&I loan balances decreased by just 0.7 percent and total loan balances increased by 1.5 percent.

When compared to Q2 2022, small business C&I loan balances decreased by 1.8 percent.

View the full survey, here.