Small Business Credit Is Tightening - Here's How to Prepare for What's Ahead | Entrepreneur
Briefly

Many small and mid-sized business owners entered 2025 with optimism, anticipating a stronger economy and easier credit access. However, data shows a decline in optimism and an increase in uncertainty. The Small Business Optimism Index fell to 102.8, while the Uncertainty Index rose to its third-highest level. Concerns about inflation and labor quality are prominent. A tightening of lending standards by banks for small business borrowers is also expected, especially affecting those with lower credit scores, indicating a more cautious financial environment for businesses seeking funding.
According to the National Federation of Independent Businesses (NFIB), the Small Business Optimism Index dropped 2.3 points in January 2025 to 102.8. While still above the long-term average of 98, it's a notable shift.
The NFIB found fewer owners plan to make capital outlays in the next six months, with numbers falling from 27% in December to 20% in January.
Inflation and labor quality were tied as the top operational concerns, each cited by 18% of respondents. Meanwhile, only 17% said now is a good time to expand.
According to the Federal Reserve's January 2025 Senior Loan Officer Opinion Survey (SLOOS), banks are beginning to tighten credit standards for small business borrowers, especially those with lower credit scores.
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