This week, everyone in banking is watching the same thing: What will the Fed do next – and what does it mean for lending?
Markets are bracing for another interest rate cut, with expectations that the Fed will lower rates again at its December meeting, taking the funds rate toward the 3.5%–3.75% range. Reuters+1
At the same time:
- U.S. banks just logged their strongest profitability in more than a decade, driven by healthy pre-provision net revenue and still-solid net interest margins. S&P Global+2FDIC+2
- Small business optimism has dipped to a six-month low, as owners struggle with profits, hiring and uncertainty. NFIB – NFIB Small Business Association+2Investopedia+2
- The New York Fed reports that households are more worried about their personal finances, even as the job market looks relatively resilient. Reuters
- Regional surveys, like the Dallas Fed’s Banking Conditions Survey, show loan volumes softening in consumer and commercial & industrial segments, with some deterioration in loan performance. Federal Reserve Bank of Dallas
Put simply:
Margins are still good.
But loan demand, credit quality, and borrower confidence are under pressure.
And the next phase of rate cuts will only raise the bar on how smart every credit decision needs to be.
That’s exactly the environment LenderSquared was built for.
Margin Compression Is Coming. Data Blind Spots Are No Longer Acceptable.
With rates likely drifting lower through 2026, analysts expect modest net interest income growth as lower loan yields and ongoing deposit competition squeeze spreads. Deloitte
For commercial lenders, that means:
- Every approved deal has to earn its keep
- Every decline needs to be defensible – to regulators, investors and the board
- And every relationship manager is being asked to do more with less time
The problem?
Most credit teams are still stitching together:
- Static industry reports
- Out-of-date peer comps
- Local market data scattered across multiple systems
- Internal portfolio data that’s hard to slice and compare
That’s not just inefficient – it’s risky. In a world of tightening standards and softening loan demand, guessing with partial data is a luxury banks no longer have.
Regulators Want Smarter, Fairer Small Business Lending
Regulators are also recalibrating how they look at small business and commercial credit.
- The CFPB is proposing changes to the small business lending data rule under ECOA (Reg B), including shifting which lenders are covered and how data must be reported. Federal Register
- The Federal Reserve is explicitly encouraging banks to use technology to expand access to credit and compete more effectively with nonbank lenders, while maintaining safety and soundness. Federal Reserve
- The OCC is warning about risk in new “venture lending” activities, asking banks to better understand the stage, risk profile and performance drivers of emerging companies on their books. OCC.gov
The message is clear:
You can’t just lend. You have to explain how and why you’re lending.
That requires granular, defensible benchmarks at the industry, peer, and local-market level – not just a national average and a gut feeling.
How LenderSquared Fits Into This Moment
LenderSquared sits at the intersection of these pressures:
- Rate volatility
- Margin compression
- Regulatory scrutiny
- Small business uncertainty
Instead of adding yet another report to the process, LenderSquared brings together:
- Benchmark Lens – real-time performance benchmarks across millions of private companies, so underwriters can see how a borrower stacks up against truly comparable peers.
- Industry & Market Lenses – local, industry-specific insights that help credit teams understand whether a borrower is struggling because of execution or environment.
- Prospect Lens – tools to identify and prioritize the right commercial and small business targets when loan demand is uneven.
For credit teams, that translates to:
- Faster, better-supported decisions when policies are tightening
- More precise conversations with credit committees and regulators
- The ability to “explain the deal” with data, not just narrative
And for banks and credit unions, it means:
- Protecting profitability as the rate tailwind fades
- Growing smartly into sectors and geographies that still have room to run
- Showing boards and regulators that their commercial book is managed with discipline, transparency, and modern analytics
The Next 12 Months: From Surviving to Outperforming
Looking ahead, the institutions that thrive in this environment will be those that:
- Embrace data-driven commercial lending instead of relying on habit and legacy reports.
- Use tools like LenderSquared to connect macro conditions to local realities – industry by industry, county by county.
- Document their decisions clearly, showing how peer benchmarks, industry signals and market data informed each deal.
Small businesses may feel cautious, but they still need capital. Banks are profitable, but know the easy rate-driven earnings lift won’t last forever. That tension is exactly where better underwriting, better targeting, and better data become a competitive advantage.
LenderSquared helps turn that tension into opportunity.
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