Fed: 12 of 50 Banks Tighten Nonbank Lender Credit
Some banks tightened lending standards for nonbank business lenders in the third quarter. In the Federal Reserve's October Senior Loan Officer Opinion Survey, released November 2, 12 of the 50 domestic banks that lend to "business credit intermediaries" said they had tightened their standards for approving those loans and credit lines over the past three months, 37 said standards were unchanged and 1 said it had eased, a net 11 banks, or 22%.1 Demand rose slightly: 8 of 56 banks reported stronger demand and 2 weaker.1
Business credit intermediaries are a Call Report category that includes finance companies, direct lenders, leasing companies and "other non-bank business lenders, including internet-based lending platforms and other marketplace lenders."2 The Fed's summary says banks tightened standards "for all queried types of loans to NDFIs," its term for nondepository financial institutions.3
Dollar balances kept rising. The Fed's weekly H.8 data put bank loans to all nondepository financial institutions at $2,064.2 billion in September, against $1,721.9 billion a year earlier.4 That is about 20% by our arithmetic, but it is a rough figure: the Fed adjusts its growth rates, not these levels, for nonbank acquisitions and accounting consolidations.4 Rising balances can also mean borrowers drawing on lines they already had. The line covers every type of nonbank financial borrower, and the survey cannot say whether the 12 tightening banks are large lenders to this sector.
Small-business credit tightened only slightly. In the same survey, 4 of 59 banks tightened standards for commercial and industrial loans to firms with annual sales under $50 million and 1 eased, a net 3, while standards for larger firms were basically unchanged.1 3
Bottom line for funders: the tightening landed on banks' loans to lenders, and the private credit funds that finance some funders borrow from banks too,5 so in our view a funder can feel it through its capital provider. Ask the fund or other capital provider that lends to you for two things this quarter: the maturity date of its own bank facility, and the clause in your agreement that sets when it can change your advance rate, eligibility or reserves. If the fund is a public BDC, its quarterly filings typically describe its credit facilities and their maturities, so you can check the first answer yourself.
The limits: the survey counts banks, not dollars. "Tightened somewhat" is a direction, not a size. Neither the Fed nor the Call Report names merchant cash advance providers or factors; treating them as business credit intermediaries is our reading. The Fed's "small firm" is any business with annual sales under $50 million. Funders that run on syndication, family-office money or participations sit outside what this survey can see; the same two questions can go to their largest participants. The Fed did not ask the same nonbank question in July, so there is no like-for-like quarterly comparison.
What Alternative Business Lenders Need to Know
What exactly did the Fed ask banks about nonbank lenders?
The October survey's special questions covered five types of nondepository financial institution, including mortgage lenders and private equity funds, and drew answers from 61 domestic banks and 18 U.S. branches of foreign banks by October 5.3 For business credit intermediaries, 10 of the domestic banks said they do not make these loans.1 The tightening was not concentrated in the biggest lenders: among banks with $100 billion or more of domestic assets, 4 of 20 tightened; among the rest, 8 of 30 tightened and 1 eased.1 The demand question drew 56 answers and the standards question 50; the Fed's tables do not explain the difference, so we give the demand count less weight. Foreign bank branches moved the same way: 3 of the 14 that lend to business credit intermediaries tightened and 11 left standards unchanged, while demand was stronger at 1 of 16 and weaker at 1.6
Who counts as a business credit intermediary?
The survey takes its definitions from the Call Report, the quarterly filing banks make to regulators.1 Beyond the lender types named above, it also covers CLOs, private debt funds, business development companies and SBICs whose assets are mostly business loans.2
A funder with a bank facility may find its line reported in this bucket, but the survey cannot say how many of the 12 tightening banks lend to MCA or factoring companies. A funder that borrows from a private debt fund or BDC instead is one step removed: the tightening that can reach it is the one applied to its capital provider.
Which terms tightened, and which did not?
The Fed says banks "tightened or left basically unchanged all surveyed terms for NDFI loans."3 The term questions cover all nonbank borrower types together. Collateralization requirements, which the question defines to include borrowing-base requirements, collateral eligibility and advance rates, tightened at 7 of 55 banks and eased at 2, a net 5, or about 9%.1 Loan covenants tightened at 5 and eased at 1, a net 4; costs of credit lines tightened at 6 and eased at 4, a net 2.1
Spreads of loan rates over the bank's cost of funds tightened at 7 banks and eased at 7, a net 0.1 On net, collateral and covenants tightened at more banks than spreads did, though costs of credit lines, also a price, tightened at a net 2. The differences come down to a few banks.
Why did banks tighten, and why did demand rise?
The reasons questions also cover all NDFI types. Of the 21 domestic banks that tightened standards or terms on NDFI loans, 16 called a less favorable or more uncertain economic outlook somewhat or very important, and 15 said the same of "deterioration in current or expected financial strength of the NDFI borrowers"; 5 called the second reason very important.1
On demand, 9 of 13 banks reporting stronger demand called working capital or liquidity needs somewhat or very important, and 8 of 13 said the same of refinancing needs.1
Our read is that this is strain worth watching, not yet stress. Borrowers seeking liquidity and refinancing while their banks cite weaker financial strength is how stress starts, but ordinary rollover of maturing facilities produces the same counts, and these answers cover mortgage warehouses and investment funds too. If January shows both again, the case for stress gets stronger.
What changed for small-business borrowers?
The net share of domestic banks tightening small-firm business-loan standards rose to 5.1% from 1.8% in the July survey, still below the 8.9% of January.7 Collateral requirements for small firms tightened at 3 of 59 banks and eased at none, while spreads eased at 10 and tightened at 6, so here too the change was in collateral rather than price.1 Of the 12 banks that gave reasons for weaker business-loan demand, 10 cited borrowers shifting to other bank or nonbank sources "because these other sources became more attractive"; the question covers firms of any size and includes other banks, so it does not show those borrowers reaching MCA funders.1
What should a lender with a bank line do before its next renewal?
Across all nonbank borrowers, collateral and covenants are mostly where the tightening landed.1 That rests on a net 5 and a net 4 banks, a thin base, but the preparation is cheap.
Have a current collateral tape ready, by vintage, with the measures used for revenue-based paper: collection speed against expected payback, performance ratio, position (first or stacked), renewal rate and reconciliation activity, plus the borrowing-base reports for the last four quarters.
Model the cut in equity terms. On $50 million of eligible receivables, moving from an 85% to an 80% advance rate removes $2.5 million of availability and raises the equity you must fund from $7.5 million to $10 million, a third more. We would expect lenders to trim stacked positions, longer terms and the weakest credit tiers first; model losing each. With paper that pays back in months, a lower advance rate can reach new originations as soon as the next borrowing-base certificate, depending on the facility.
Know the covenant headroom on liquidity, leverage and portfolio performance tests before the bank asks, since covenants tightened at more banks than eased.
Read the facility for the lender's rights to change eligibility criteria, concentration limits or reserves between renewals. A recent renewal does not end that exposure.
Our Opinion
Most banks changed nothing, and rising balances are not proof that credit is easy. What changed is where the tightening landed: on loans to lenders, after the July survey had already put standards on those loans at the tighter end of their historical range, even as business-loan standards sat easier than their midpoints.8 9 The next readings to watch are the January survey and the weekly H.8 line.
In our view, the funders least able to see this coming are the ones whose capital comes from a private debt fund or BDC rather than a bank line of their own. The first link in that chain is documented. A Fed note published October 16 counts $349 billion of bank loans to U.S. private credit vehicles at the end of 2025, and for BDCs bank loans are about two-thirds of liabilities.5 A Fed note from August found that during the 2022 to 2023 rate-hiking cycle, large banks charged BDCs a premium that reached roughly 1.1 percentage points over non-BDC borrowers with the same internal credit rating, and that "BDCs may pass some of that cost to the firms they finance."10 The Call Report puts private debt funds and BDCs in the same category the banks tightened on in October.2 The last link, from a fund to the small-business funders it finances, is our inference: we found no filing that names a bank, a fund and a funder in one chain.
A funder with its own bank line can hear about tighter terms at renewal. A fund-backed funder may hear only when its advance rate changes. If your fund's bank facility matures before your own agreement, treat that date as your renewal too. Before it arrives, line up a second capital source, and at your next amendment ask for terms that buy time: written notice before any advance-rate, eligibility or reserve change, a cure period before a change takes effect, and a cap on discretionary reserves.
When application volume outgrows manual lookups
As monthly application volume grows from dozens of deals to hundreds, manual Secretary of State lookups take up underwriter hours that could go to credit decisions. The video walks through the time math and shows an approach where routine entity checks run automatically and people handle the exceptions.
Cobalt Intelligence's Secretary of State API searches business entity records from official state sources across all 50 states and D.C. When a state website is slow, a callback URL option sends the result to your system once the lookup finishes.
Free Tools for Lending Teams
Headlines You Don’t Want to Miss
The Small Business Administration said on November 2 that it delivered "$100 billion in capital and related assistance" in fiscal 2026. The loan guarantees in that figure total $39.5 billion on 62,205 7(a) and 504 loans; the largest other piece is a "record $60 billion in combined private capital and SBA leverage" in the SBIC program, a portfolio rather than a year's lending.11 SBA's fiscal 2025 release, stated as of publication rather than as audited totals, reported 84,400 7(a) and 504 loans for $44.8 billion, so by our arithmetic guarantees fell about 12% by dollars and 26% by count.12 SBA says a 43-day shutdown halted its lending for nearly two months of the year, at an estimated $170 million of loans a business day.11 Using SBA's 43-day figure, roughly 30 business days, that is about $5 billion, close to the $5.3 billion drop in guarantee dollars, while the average loan rose to about $635,000 from about $531,000.
That suggests most of the dollar decline could be the shutdown, while the count drop was concentrated in smaller loans: in the nine-month 7(a) data Beyond Banks reported on October 10, approvals of $150,000 or less fell 39.9%.13 For lenders competing with SBA products, loan count and small-loan volume are the better numbers to track. Whether those smaller borrowers are now applying to funders is something a funder can see in its own pipeline by deal size; the SBA data cannot show it.
Verifone Offers Fuel and Convenience Retailers Cash Advances of Up to Two Times Monthly Card Revenue
Verifone has launched Commander Capital, a "Merchant Cash Advance program with YouLend" for unbranded fuel retailers and independent convenience stores on its Commander point-of-sale platform. Its product page offers "up to two times your monthly card revenue," repaid "as a fixed percentage of daily sales," with "one fixed fee" and same-day funds after approval.14 The Fintech Times puts the platform at more than 55,000 active Commander sites.15 Neither source discloses the fee level or program size. In our view, at sites where fuel is most of the card volume, gross card sales overstate what the store keeps, so an advance sized to card revenue should be underwritten against margin. A share of daily card sales may also already be committed before your application arrives; comparing processor statements with bank deposits can show it.
America's Car-Mart said in an 8-K filed November 2 that lenders under its October 2025 credit agreement, with Silver Point Finance as agent, extended a limited waiver of its minimum liquidity and minimum Collateral Coverage Ratio covenants through November 4. The waiver originally ran to September 7, and the filing discloses no fee for the latest extension.16 The prior extension, reported October 21, added $5.0 million of term loans, with $200,000 of fees added to principal.17 Car-Mart has filed nine 8-Ks reporting a material agreement since September 4, about one a week.18 On October 15 the company said it "believes it has made significant progress towards a transaction," with no assurance of a permanent waiver.19
For a funder with liquidity and collateral-coverage covenants in its own facility, the filings show what week-by-week relief costs: each window ends in a new decision by the lenders, and one came with fees added to principal. The company's next filing should show whether the lenders extended again.
Sources
1 Board of Governors of the Federal Reserve System | October 2026 Senior Loan Officer Opinion Survey, Table 1, domestic banks (Nov. 2, 2026)
2 FFIEC via FDIC | Call Report instructions, FFIEC 031 and 041 Schedule RC-C, Loans and Lease Financing Receivables, item 9.a
3 Board of Governors of the Federal Reserve System | The October 2026 Senior Loan Officer Opinion Survey on Bank Lending Practices (Nov. 2, 2026)
4 Board of Governors of the Federal Reserve System | H.8, Assets and Liabilities of Commercial Banks in the United States, Table 2, seasonally adjusted (Oct. 30, 2026)
5 Board of Governors of the Federal Reserve System, FEDS Notes | Introducing Private Credit into the Financial Accounts of the United States (Oct. 16, 2026)
6 Board of Governors of the Federal Reserve System | October 2026 Senior Loan Officer Opinion Survey, Table 2, U.S. branches and agencies of foreign banks (Nov. 2, 2026)
7 Federal Reserve Bank of St. Louis, FRED | Net Percentage of Domestic Banks Tightening Standards for C&I Loans to Small Firms (DRTSCIS)
8 Board of Governors of the Federal Reserve System | July 2026 Senior Loan Officer Opinion Survey, Table 1 (Aug. 3, 2026)
9 Beyond Banks | Banks loosened business credit past its historical midpoint, citing nonbank competition (Aug. 6, 2026)
10 Board of Governors of the Federal Reserve System, FEDS Notes | The Price of Bank Funding Behind Private Credit: Evidence from Business Development Companies (Aug. 7, 2026)
11 U.S. Small Business Administration | News release 26-113, SBA Fuels Main Street Growth with $100 Billion Delivered in FY26 (Nov. 2, 2026)
12 U.S. Small Business Administration | News release 25-83, Trump SBA Delivers Record Capital to Small Businesses in FY25 (Sept. 30, 2025)
13 Beyond Banks | SBA approved 21,881 fewer 7(a) loans (Oct. 10, 2026)
14 Verifone | Commander Capital powered by YouLend, product page (accessed Nov. 3, 2026)
15 The Fintech Times | Verifone Moves into Merchant Financing with Commander Capital (Nov. 2, 2026)
16 America's Car-Mart | Form 8-K, First Amendment and Limited Waiver extension to Nov. 4 (filed Nov. 2, 2026)
17 America's Car-Mart | Form 8-K, Second Amendment and $5.0 million incremental term loans (filed Oct. 21, 2026)
18 U.S. Securities and Exchange Commission | EDGAR filing index, America's Car-Mart Form 8-K filings
19 America's Car-Mart | Form 8-K, Item 8.01 update on strategic alternatives and waiver extension (filed Oct. 15, 2026)
