Demand for commercial and industrial loans weakened last quarter for the first time since the second quarter of 2025, according to the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey released Monday. Banks said some borrowers were turning to more attractive financing from other banks or nonbank lenders, as well as citing reduced investment in plants and equipment.
The survey showed little change in lending standards for large and midsized businesses, but tighter standards for smaller firms. Banks also tightened requirements for riskier loans, while easing or leaving largely unchanged most other terms for commercial and industrial credit.
A government report released last week showed business equipment spending grew at a 20.9% annualized rate last quarter, contributing more to GDP growth than in any quarter in six years. Oxford Economics analysts called the absence of continued tightening for large-company loans encouraging and said it could support business investment broadening beyond AI.
Banks that tightened commercial lending standards most often pointed to a less favorable or more uncertain economic outlook and worsening industry-specific problems. The Fed survey also found sharply weaker demand for residential real estate loans and lower demand for auto loans, while credit card borrowing demand recorded its strongest increase in four years.
The survey was among the information available to Fed policymakers when they decided to leave short-term borrowing costs unchanged at their October 27-28 meeting.
Sources: Investing.com News.