In November 2023 Billboard Insider reported the loan market was tightening. Well, unfortunately, the April 2025 Senior Loan Officer Opinion Survey on Bank Lending Practices confirms this trend with more banks tightening their lending standards and terms. For the first quarter of 2025, survey respondents reported tighter lending standards and weaker demand for commercial loans to firms of all sizes.
More specifically, starting in the fourth quarter of 2004, an increasing number of banks are reporting smaller maximum sizes of credit lines, higher premiums on riskier loans, tighter loan covenants, tighter collateralization requirements, and more frequent use of interest rate floors for firms of all sizes. This last point is noteworthy because at the same time banks have reported lowering loan spreads over their banks’ cost of funds for small firms. That is an easy concession for a bank if it is adding an interest rate floor.
Among banks that reported having tightened standards and terms for commercial loans, the reasons cited were a less favorable or more uncertain economic outlook; increased concerns about the effects of legislative changes, supervisory actions, or changes in accounting standards; the worsening of industry-specific problems; and a reduced tolerance for risk.
Regarding demand for commercial loans over the first quarter of 2025, respondents reported weaker demand from firms of all sizes. The most frequently cited reasons for weaker demand were decreased customer investment in plant or equipment and decreased customer financing needs for mergers or acquisitions. However, we know the OOH industry may be bucking both of these wider trends.
In the chart below from the current survey, credit standards and terms are relatively tighter above the 0 base line than below, and standards and terms are tightening when the charted line is moving up as has been the case in the first quarter of 2025.
As always, you should stay in close touch with your banker. Don’t call them only when you need something urgent. They will be in a better position to help when you keep them updated on your performance and your plans.
Ken Altena is a partner in Billboard Loans, LLC. which has funded $191 million in small loans and equity investments since 1997. You can reach Ken at kenaltena@billboardloans.com, 206-636-8478
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