Bank surveys say loan standards remain tight, approval odds are softer than pre-pandemic, and small-firm capex plans look tentative. Is credit a new drag on Main Street activity on both sides of the Atlantic?
1) The temperature check: surveys point to tighter standards and cautious borrowers
United States. The Federal Reserve’s July 2025 Senior Loan Officer Opinion Survey (SLOOS) reported that, on balance, banks tightened standards and saw weaker demand for commercial & industrial (C&I) credit to firms of all sizes in Q2. Standards on commercial real estate loans also tightened. In short: lenders remain selective and borrowers are hesitant. (Federal Reserve)
United Kingdom. The Bank of England’s Q2 2025 Credit Conditions Survey painted a more nuanced picture: lenders said credit availability for SMEs ticked up slightly in Q2, with a further small improvement expected in Q3. That said, availability doesn’t guarantee approvals—especially for very small or stressed firms. (Bank of England)
Approval reality checks. In the U.S., the Fed’s Small Business Credit Survey (SBCS) shows application rates steady but full approvals still below pre-COVID levels; more applicants are turning to smaller banks and nonbanks, rather than the largest banks, to get deals done. (fedsmallbusiness.org) In the UK, ministers recently summoned big-bank CEOs over concerns that SME approval rates have slipped below 50%, versus about 67% in 2018—a political sign that access to finance is under scrutiny. (The Guardian)
What owners say they’ll do. U.S. sentiment brightened in July—NFIB’s Small Business Optimism Index rose—yet plans for capital outlays remain middling by history: 55% reported some outlays in the past six months, and 22% plan new outlays in the next six, still below the long-run average. That’s consistent with “cautious investment” rather than a spending boom. (NFIB – NFIB Small Business Association, haver.com)
2) Lending standards in pictures (what’s behind the survey lines)
- Banks are choosier about risk. SLOOS respondents cite economic uncertainty and sector-specific headwinds when explaining why standards are tighter—especially for smaller companies, where terms tended to firm up more than for mid/large borrowers. (LSTA)
- Demand is cooler, too. When rates are high and growth is uncertain, many owners simply don’t borrow. The Fed’s April 2025 Financial Stability Report noted that small-business loan originations edged up into early 2025, but the share of firms that borrow regularly remains subdued. (Federal Reserve)
- Credit quality is okay but fraying at the edges. Aggregate U.S. business-loan delinquency is still low (1.30% in Q1 2025), yet trending gently higher from 2024. Early-cycle stress tends to show up first in specific niches (see hospitality/CRE below). (FRED)
UK twist: The banking channel is not the whole market. The British Business Bank documents how challenger and specialist banks now provide a majority of SME bank lending (about 60% in 2024), and private-debt/asset-finance options keep growing—lifelines when high-street approvals lag. But the BBB also stresses that a lot of 2024 lending was for working capital rather than growth capex, echoing caution on investment. (British Business Bank)
3) Sector pain points: hospitality and construction under pressure
United Kingdom. Insolvency data show stress clustering in construction and hospitality. Registered company insolvencies in England & Wales were 15% higher year-over-year in May 2025, with professional commentary flagging elevated closures in pubs, restaurants, and construction firms. Accommodation & food-services insolvencies hit 295 in May (the highest since Nov 2024), even if the 12-month trend has eased a touch from 2024’s peaks. (GOV.UK, rsmuk.com)
United States. The stress is more visible in property finance linked to consumer-facing sectors. CMBS delinquencies crossed 7% in April (first time since Jan 2021), with lodging among the swing factors; by June the overall rate edged to 7.13%. This isn’t the same as bank loan books, but it’s a relevant perimeter indicator for small operators tied to hotels, restaurants, and retail corridors. (MBA Newslink, trepp.com)
Why these sectors? Both depend on footfall and discretionary income; both are exposed to energy, wage, and input costs; and construction adds materials and financing sensitivity. For smaller firms, every extra basis point on borrowing—or every delay in approvals—can force deferrals of hiring, refurbishments, and new sites.
4) Alternative lenders & the pricing reality
When approvals slow at the big banks, owners often pivot to community banks, online lenders, specialist finance, or invoice/asset-based lending.
- U.S. pricing: Recent roundups put average bank small-business loan rates roughly 6.6%–11.5% in early 2025, while online/fintech options can range far higher depending on product and risk. Lines of credit commonly price higher than term loans, especially on a variable basis. (Ranges vary widely—always read the APR.) (NerdWallet, biz2credit.com)
- UK mix: The BBB’s 2024/25 markets report documents a diversifying lender base (challengers, private-debt funds, asset finance), which has helped fill gaps as high-street underwriting tightened—though terms and costs can be meaningfully higher than traditional bank loans. (British Business Bank)
Bottom line: Access is there, but price bites—and for marginal borrowers, that can push capex and hiring into “wait-and-see.”
5) Macro spillovers: capex, jobs, and growth channels
Capex: With standards tighter and pricing higher, small-firm capex tilts toward replacement rather than expansion. The NFIB’s July read—plans to make capital outlays at 22%—underscores adequate but not exuberant investment appetite compared with long-run norms. That tends to slow the refresh cycle for equipment, vehicles, and fit-outs. (haver.com)
Employment: Slower approvals and pricier credit can soften hiring in the most interest-sensitive corners of Main Street. While the U.S. labor market remains resilient overall, owners continue to cite labor quality as a top problem—and higher financing costs lengthen the payback period for bringing on new staff, especially in hospitality and construction. (NFIB’s July report again flagged labor quality as the single most frequently cited problem.) (NFIB – NFIB Small Business Association)
Cash-flow cushions: Some U.S. firms refinanced in 2021–22 at low rates and still have runway; others—especially newer or sub-scale firms—face re-pricing risk when facilities roll. In the UK, the rise of challenger/private lenders has preserved access but often with tighter covenants and higher spreads, which can pinch margins if sales soften. (British Business Bank)
CRE loop-through: The uptick in U.S. CMBS delinquencies doesn’t equal a banking-system crisis, but it can tighten local conditions for borrowers tied to retail corridors or hotels as landlords and lenders turn more defensive on new exposure. (trepp.com)
6) Country standouts & local dynamics
United States.
- Standards & demand: Tighter standards + weaker demand for C&I in Q2, per SLOOS—a consistent message across large and small firms. (Federal Reserve)
- Approvals: SBCS shows full approvals below pre-COVID; more applicants are approaching small banks and nonbanks than in 2023. (fedsmallbusiness.org)
- Delinquencies: Aggregate bank business-loan delinquencies are still low (1.30%) but creeping up; stress pockets show up in CMBS and smaller sub-sectors first. (FRED, trepp.com)
United Kingdom.
- Availability vs. approvals: Lenders report slight improvements in SME credit availability, but owners still face mixed approval odds—hence the policy focus on SME lending. (Bank of England, The Guardian)
- Sector stress: Insolvency Service data confirm elevated closures in construction and hospitality; several monthly snapshots this year show those sectors leading failures even as totals ebb and flow. (GOV.UK, rsmuk.com)
- Market structure: Challengers and specialists provide ~60% of SME bank lending, cushioning access but often at higher cost. Asset-finance and invoice-finance usage remains significant. (British Business Bank)
7) What owners, lenders, and policymakers should watch next (non-advisory)
In the U.S.:
- The next SLOOS and the Fed’s Financial Stability updates for evidence that standards are easing and demand is stabilizing. (Federal Reserve)
- NFIB monthly trends in plans to make capital outlays and hiring plans—clean coincident reads on Main Street momentum. (NFIB – NFIB Small Business Association)
- CRE/CMBS delinquency direction (Trepp). If lodging/retail stabilize, that reduces “collateral damage” to bank risk appetite. (trepp.com)
In the UK:
- The BoE Credit Conditions Survey (Q3) for follow-through on availability and pricing; UK Finance quarterly SME lending (levels, sectors). (Bank of England, UK Finance)
- Insolvency Service monthly prints, especially accommodation/food services and construction. (GOV.UK)
- Policy levers: any expansion of British Business Bank guarantee schemes or new guidance on relationship banking for SMEs. (UK Finance)
8) Practical checklist for readers (educational, not advice)
- Map your lender set. If your primary bank is slow, know the alternatives (community banks, challenger/specialist banks, asset-based lenders) and the true APR after fees. U.S. ranges in 2025 run ~6.6–11.5% at banks and much higher at online lenders depending on product and risk. UK owners will see similar price tiers across high-street vs. specialist finance. (NerdWallet, British Business Bank)
- Build approval probability, not just price. The SBCS shows full approvals remain below pre-pandemic; improve your odds (clean financials, collateral, multi-year plans) before chasing the last basis point. (fedsmallbusiness.org)
- Watch sector signals. If you’re in hospitality or construction, monitor insolvency and delinquency indicators—these shape lenders’ sector appetite and structure (covenants, guarantees). (rsmuk.com, GOV.UK)
- Align capex to payback. With rates still elevated and approvals slower, prioritize projects with shorter paybacks and robust cash-flow coverage; defer “nice-to-have” expansions until funding terms improve. (General education, not advice.)
The bottom line
Across the U.S. and UK, credit isn’t closed, but it’s harder and costlier—especially for the smallest or most cyclical firms. U.S. banks report tighter standards and softer demand; UK lenders say availability is inching up, yet on-the-ground approvals remain uneven and sector stress (hospitality, construction) is still visible in insolvency data. Alternative lenders fill gaps, but the price of money—and the time to yes—are the frictions that nudge owners to delay capex and hiring. Until rates fall decisively and risk appetite broadens, Main Street’s investment plans are likely to wobble rather than surge.
Sources (selected)
- U.S. lending standards & demand: Federal Reserve, July 2025 SLOOS (Q2 results). (Federal Reserve)
- U.S. approvals & lender mix: Federal Reserve Small Business Credit Survey (2025 Report on Employer Firms). (fedsmallbusiness.org)
- U.S. small-business delinquencies (aggregate): FRED DRBLACBS series (Q1 2025: 1.30%). (FRED)
- U.S. CMBS stress: Trepp delinquency updates (April 7.03%; June 7.13%). (trepp.com)
- U.S. capex plans: NFIB July 2025 SBET (capex reported, plans). (NFIB – NFIB Small Business Association, haver.com)
- UK credit availability: Bank of England Credit Conditions Survey Q2 2025. (Bank of England)
- UK SME lending levels: UK Finance Business Finance Review Q1 2025 (gross lending £4.6bn; six consecutive quarterly rises). (UK Finance)
- UK lender mix & alternative finance trends: British Business Bank Small Business Finance Markets 2024/25 (challenger banks ~60% share; finance largely for working capital). (British Business Bank)
- UK insolvency trends & sector stress: Insolvency Service monthly stats and hospitality commentary. (GOV.UK, rsmuk.com)
- U.S. rate ranges for small-business credit: NerdWallet summaries (bank 6.6–11.5% avg; product range context). (NerdWallet)
Disclosure & important information
The information above is for general informational and educational purposes only and does not constitute investment, financial, legal, or tax advice. Please verify key facts and figures directly from the cited primary sources (central bank releases, official statistics, and company/industry reports) before relying on them. We do not recommend buying, selling, or using any specific financial product or strategy. If you need advice tailored to your situation, consult a licensed professional in your jurisdiction.