Banks tightened credit for lenders, too

Banks made small-business loans harder to get during the third quarter. They also tightened credit for the nonbank lenders that help finance those businesses.

The Fed’s October survey found that 24% of banks responding about loans to nonbank business lenders had tightened standards. Most, 74%, reported no change. The findings cover roughly Q3 2026. Read the survey results.

An independent lender can therefore face two pressures at once. Businesses that cannot get a bank loan may come looking for an alternative. Meanwhile, the bank providing that lender’s own credit line may be becoming more selective.

At Kita, we think that makes the conditions attached to funding an important part of the growth discussion. There is a difference between having credit available and being able to use it for a particular loan.

Which loans will the money cover?

A funding agreement may restrict the size or type of loans it covers. A borrower could meet the lender’s credit policy while their loan falls outside those conditions.

We would explore AI as a way to check for that mismatch earlier. It could read the agreement, identify its requirements and link them to the relevant wording. Finance would review those requirements before they were used to check applications.

For example, an approved loan above the agreement’s size limit would still need another source of funding or revised terms. An AI-assisted check could show the amount and the limit together, with the documents behind each.

That information would help a lender see which applications it can finance before committing more money to attracting borrowers. Faster approvals alone would leave the funding question unanswered.