Banks tightened some small-business lending standards and credit-card limits during the third quarter, the Federal Reserve's October lending survey, released Monday, shows. Most responding banks kept those policies unchanged.
The survey measures banks' policies and reported demand. It does not give an individual applicant's odds of approval or tell a cardholder whether their own limit changed.
What changed for small businesses
Of 59 banks answering the small-business standards question, four tightened, one eased and 54 left standards unchanged, according to the Fed's detailed response table. The unchanged group accounted for 91.5% of respondents.
Subtracting the share that eased from the share that tightened produces a net tightening of about 5.1 percentage points. That calculation counts banks, without weighting them by lending volume. It is not a 5.1% rejection rate or a measure of how many businesses lost access to loans.
Demand also softened. Nine banks reported weaker small-business loan demand, two reported stronger demand and 48 saw no change. So both sides of the transaction moved: some lenders became more restrictive while fewer businesses sought financing at some banks.
The Fed defines small firms here as businesses with annual sales below $50 million. That survey category should not be treated as a determination of eligibility for a particular small-business assistance program.
Approval standards and loan terms can move separately. Banks generally reported easier or unchanged terms on commercial and industrial loans, with exceptions including tougher collateral requirements and interest-rate floors for small firms. An applicant may therefore face a different question about qualifying than an approved borrower faces about the contract's cost or security.
How that compares with the previous quarter
The July survey, released August 3 and generally covering the second quarter, found commercial and industrial lending standards broadly unchanged for both smaller and larger companies. Small-business demand was also broadly unchanged. Reuters' reporting at the time described that stable business-lending picture.
The latest survey thus shows a turn toward modest tightening and weaker demand for smaller firms. It is a comparison of successive surveys, with different respondent totals: July had 56 domestic banks and October had 61. Neither release tracks every US lender.
For a business comparing financing offers, the relevant changes extend beyond the quoted rate. Collateral requirements and a rate floor can affect what the business must pledge and whether its borrowing cost can fall. The survey's national result cannot establish the terms a particular bank will offer.
Card limits are a separate decision from approval
Among 49 banks answering the credit-card limit question, four tightened limits, one eased and 44 left them unchanged. The question covers new or existing accounts; those answers cannot establish that all four banks cut existing customers' limits.
Banks broadly left card approval standards unchanged, while reporting stronger card demand. A lender can keep its approval policy steady while offering less borrowing capacity.
For a cardholder whose limit does fall, available credit can shrink even without additional spending. For example, a $1,500 balance uses 30% of a $5,000 limit. If the limit falls to $3,000 and the balance stays the same, utilization becomes 50%. Those are illustrative calculations, not a borrower described in the survey. The CFPB's research on credit-line decreases, published in 2022, explains this utilization effect.
The CFPB's current consumer guidance says issuers generally can lower a credit limit. In most instances, they must provide an adverse-action notice with specific reasons or explain the right to request those reasons.
A separate 45-day notice protection concerns over-limit fees or penalty rates imposed because a balance exceeds a newly lowered limit. It should not be read as a universal requirement for 45 days' advance warning before the limit itself changes.
The October survey generally describes the prior three months. Banks received it September 21 and were asked to respond by October 5. Its release on November 2 does not make it a reading of this week's borrowing conditions.
