Small Business Loan Delinquencies Rose Since 2024
Financial institutions report rising defaults despite increased lending volume for small and midsize businesses.
Updated on Sept. 28, 2026 in Employment
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A May 2026 survey found that 77% of credit professionals observed higher delinquency rates for small and midsize business loans over the past two years. Despite these risks, 87% of institutions reported increased loan volume and demand for credit.
Why it matters
The rise in defaults coupled with increased loan demand suggests a shifting credit environment for business owners. Financial institutions are responding to these challenges by adopting advanced analytics and alternative data to better manage risk during the loan process.
While 77% of institutions noted rising delinquencies, 60% of lenders reported higher approval rates for small businesses. These institutions are increasingly using alternative data at origination, with 62% of lenders currently integrating these metrics.
The players
LexisNexis
A data analytics company that released the survey report on SMB credit assessment.
The details
Lenders are increasingly utilizing AI, machine learning, and alternative data to navigate the balance between high demand and credit risk. These tools are applied throughout the origination and portfolio monitoring process to detect early warning signs of deterioration, though only 37% of institutions currently report high confidence in these identification methods. Looking forward, 75% of institutions plan to increase investments in AI and fraud-detection tools over the next two years.
Timeline
May 2026: Survey of 125 credit professionals conducted.
Past two years: Period covered for reported delinquency and volume increases.
Next 12 months: Period for projected SMB credit approval rate increases.
Next 1-2 years: Period for planned AI and fraud tool investments.
Money Landscape
The current uptick in delinquencies reflects the ongoing pressure on small business credit within the post-2022 lending environment. Institutions are increasingly shifting toward automated risk assessment as they attempt to balance growth with the need to mitigate potential defaults.
Business owners may face more rigorous automated screening processes as lenders prioritize AI-driven risk mitigation. You should maintain clean financial records and speak with a professional advisor to understand how your business profile appears under these evolving underwriting standards.
The takeaway
Lenders are rapidly adopting AI tools to manage a difficult balance of high demand and rising defaults. Business owners should review their own credit reports and financial statements to ensure accuracy before applying for new financing in this climate.
Further reading
For more information on the current state of the labor and business credit market, visit Employment.
Source note: This article includes information reported by CUToday.
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