A Strategic Look at Main Street: What 2025 Taught Us and How Lenders Can Stay Ahead in 2026

Highlights: 

• Lender Strategy for 2026: Success depends on balancing caution with opportunity, leveraging advanced data and flexible loan products to support resilient small businesses.
• Market Outlook: Prepare for cautious borrowing in 2026, driven by interest rate movement and consumer spending, while using advanced data to safely expand credit access.

Small businesses faced another year of challenges and surprises in 2025. For lenders, it was a year that required patience, sharper risk management, and a stronger focus on understanding how small businesses were adapting to a fast-changing economy. This recap takes a look at the trends that shaped lending this year, what they revealed about small business behavior, and how lenders can use these lessons in 2026 and beyond.

Where We Started: A Market Searching for Stability

At the start of the year, lending conditions looked mixed. Small business credit demand showed small gains, and some early signs suggested financial stress might be easing. Short-term delinquencies and defaults were leveling off, and long-term delinquencies had stopped rising. For lenders, this looked like a moment where risk was no longer rising sharply and where borrowers might be regaining some footing.

But this stability was fragile. Small business owners still faced high borrowing costs, uneven consumer demand, and questions about the direction of the broader economy. Many lenders began the year with conservative underwriting and caution around industries sensitive to consumer spending or supply chain volatility.

The Spring Pullback: When Uncertainty Took Over

By March and April, the picture shifted again. Lending dropped, and the decline was deeper than anything seen in the previous two years. Borrowers delayed expansion plans, cut down on inventory purchases, and took a wait-and-see approach. Talk of trade shifts and policy changes only amplified hesitation.

For lenders, this drop in borrowing demand wasn’t just about the economy. It also reflected changes in borrower behavior. Businesses that had taken on debt during the pandemic recovery were more reluctant to add new loans in an environment of higher rates. Many small businesses also tightened their own internal spending, which meant fewer loan applications.

This part of the year emphasized how closely tied small business lending is to confidence. Even when hard economic data looked steady, the emotional side of the economy — fear of higher costs, uncertainty around trade, doubt about consumer spending — still had the power to slow borrowing.

The Mid-Year Rebound: Signs of Resilience

Summer brought a different tone. Lending bounced back, showing strong month-to-month gains. Even though overall lending volumes were still below the levels from the year before, borrowers showed they were willing to reenter the market when conditions felt more predictable.

This rebound highlighted a key theme for lenders: Small businesses are resilient when they have a clear picture of what’s ahead. Stability, even if not ideal, makes planning possible. Volatility, even when short, creates hesitation.

During this period, lenders also saw delinquency and default rates stabilize or improve. This positive movement helped build confidence that lending growth could continue without an immediate rise in risk. It also suggested that many businesses were adapting to high rates and adjusting their operations to stay afloat.

The Bottom Line: A Year of Push and Pull

When looking at all of 2025, the year can be summed up as a tug-of-war between pressure and resilience.

Pressure came from high interest rates, trade-related concerns, uneven customer demand, and tighter lending standards. Resilience came from strong labor markets, better data tools for underwriting, and the creativity of small businesses finding ways to navigate their challenges.

For lenders, the challenge was to distinguish between temporary caution and real, long-term risk. Many lenders leaned more heavily on data to tell the difference, looking beyond traditional credit history to get a fuller picture of each business’s financial health.

What Lenders Learned in 2025

As we look back, a few important lessons stand out:

1. Confidence is as important as cash flow. Borrowers slowed down when uncertainty grew. They moved again when they could see the road ahead, even if the road wasn’t perfect. Understanding sentiment will remain important for forecasting demand.

2. Risk is changing in structure, not just size. Some industries that once looked stable now respond more quickly to economic changes. Other industries proved more resilient than expected. Lenders had to look deeper into what was driving performance, not just the final numbers.

3. Better data makes better decisions. Many lenders leaned on newer tools — including improved revenue insights and combined business-owner credit data — to get a fuller picture of borrower health. This process helped identify creditworthy businesses that might have been overlooked under older methods.

4. Flexibility matters. Lenders who offered more adaptable products, like shorter-term loans or variable credit lines, saw stronger engagement from cautious business owners. Product flexibility became a way to support borrowers while managing lender risk.

Looking Ahead: What We’re Watching in 2026

As we start 2026, there are several trends that lenders should keep an eye on. Each could shape lending demand, borrower behavior, and the broader risk environment.

• Interest rate movement: Many small businesses are waiting to see whether borrowing costs will come down. If rates fall, we may see renewed credit demand. If rates stay high, lenders should expect cautious borrowing to continue.

• Consumer spending: Many small businesses depend heavily on consumers. Any shift in spending, confidence, or employment will show up fast in Main Street performance.

• Debt rollover pressure: Some small businesses are nearing renewal points for loans taken out during or shortly after the pandemic. How these businesses handle refinancing in today’s rate environment will be an important risk indicator.

• Adoption of advanced data tools: As more lenders adopt richer data sources and improved scoring models, credit access could expand for small businesses that have been historically underserved. This shift could be one of the most meaningful changes of 2026.

• Shifts within small business segments: Certain industries, like services, hospitality, and personal care, may respond differently if consumer demand changes. Others, like manufacturing or logistics, may feel more pressure from policy changes. Tracking these differences will help lenders focus their strategies.

Final Thoughts

The main story of 2025 is that small businesses held on through uncertainty, and lenders found ways to keep credit flowing despite unpredictable conditions. As we enter 2026, lenders can use what they learned this year to prepare for a market that may still shift quickly.

Success next year will depend on balancing caution with opportunity. It will require better data, flexible products, and careful attention to changing economic signals. If lenders stay ready to adapt, they can support small businesses through whatever comes next — and help Main Street grow again when the conditions allow.

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