New Report: 93% of Lenders May Be Turning Away Good SMB Customers
SMB Lenders Expand Credit Even as Delinquencies and Fraud Concerns Rise
U.S. financial institutions are increasing small-business lending and approval rates despite reporting higher delinquencies, fraud risks and gaps in their ability to identify deteriorating borrowers early, according to a LexisNexis Risk Solutions survey.
The survey found that 72% of SMB credit professionals said their institutions were actively or moderately expanding small-business credit operations. At the same time, 77% said delinquency rates among SMB borrowers had risen during the past two years.
LexisNexis Risk Solutions said the findings point to a decisioning problem for lenders seeking growth: 93% of respondents said their organizations may be declining creditworthy small businesses without realizing it.
Demand is also increasing. Eighty-seven percent of respondents reported higher loan volumes or demand over the past two years, while 60% reported higher approval rates. Seventy percent expect approval rates to increase further over the next 12 months, and no respondents anticipated a decline.
Fraud and identity risk, monitoring risk in existing portfolios, and evaluating applicants with incomplete or thin credit files were each named by 30% of respondents as leading challenges.
Confidence in credit-risk capabilities was uneven, the report found. Only half of those surveyed said they were very confident in any of the capabilities measured, while 37% expressed strong confidence in their ability to identify early warning signs of credit deterioration—the lowest-rated area.
Lenders are increasingly using alternative data to address some of those gaps. Sixty-two percent use it at loan origination, compared with 46% in underwriting and 42% in portfolio monitoring and management. Forty-seven percent said alternative data had a major effect on speeding credit decisions, while 45% said it had a major impact on approving applicants with limited conventional credit histories.
Investment plans also signal broader adoption of automated decisioning tools. Over the next one to two years, 75% of respondents expect to increase investment in artificial intelligence, 64% plan additional spending on fraud and identity-risk tools, and 54% expect to invest more in automation or straight-through processing.
Although nearly 90% of institutions surveyed use analytics, AI or machine learning in some form, only 22% said those tools are used extensively throughout their SMB credit-decisioning processes.
The findings are based on a May 2026 survey, conducted with an independent research firm, of 125 U.S. financial-institution professionals involved in assessing SMB credit.