Small Business Lending Grew in Q3 2024 Despite Tightening Credit Standards and Low Demand

January 7, 2025

Delaney Sexton
Contributing Editor

Small Business Lending Grew in Q3 2024 Despite Tightening Credit Standards and Low Demand

In the third quarter of 2024, small business lending grew by 1.8% compared to the same period in 2023 and 6.9% compared to the previous quarter. Quarter-over-quarter, there was a 16.5% increase in new credit lines and a 1.3% increase in new term loans. Credit lines also increased by 6.2% year-over-year, but new term loans fell 1% from last year. Large banks and small banks contributed to increases in new small business lending while midsized banks reported decreases.

Outstanding small business loan balances increased by 1.3% compared to the year before while C&I loans decreased by 2.6%. Total loans decreased by 1%. The boost in small business loans can be attributed to large and midsize banks, but small banks reported decreases. Quarter-over-quarter, all loan categories saw a slight decrease.

Still following the trend, banks reported that loan demand declined for the tenth consecutive quarter. About 9% of banks said that there was weaker loan demand. For the twelfth consecutive quarter, banks reported that their credit standards tightened in the third quarter of 2024. When asked about the reason for all loan terms tightening, 86% of respondents pointed to a less favorable or more uncertain economic outlook.

Source:
The Federal Reserve Bank of Kansas City Small Business Lending Survey