Survey: KC Fed Find Small Business Loans Rise, First Time Since 2021

Posted December 21, 2023

The Federal Reserve Bank of Kansas City released its Third Quarter 2023 National Small Business Lending Survey, showing an increase in loan balances but new lending continues to decline.

The survey found that outstanding small business commercial and industrial (C&I) loan balances increased year-over-year for the first time since Q1 2021, despite remaining stable in the last two quarters.

Compared to Q3 2022, small business C&I loan balances increased by 3.7 percent, C&I loan balances increased by 0.5 percent, and total loan balances increased by 2.4 percent.

Furthermore, new lending declined in Q3, decreasing by 18.1 percent from the same period in 2022 and 16.4 percent from the previous quarter.

More key findings from the Fed include:

• New lending continued to decline in the third quarter, decreasing 18.1 percent from the same period in 2022 and 16.4 percent from the previous quarter, despite the year-over-year increase in outstanding small business commercial and industrial loan balances.
• Respondents reported declining loan demand for the sixth consecutive quarter, despite a minimal increase in loan approval rates.
• With over $65 billion in small business loans reported, the 150 respondents to the survey indicated that credit standards tightened while credit quality continued to decrease, and interest rates generally rose, consistent with the current rate environment.