At 1.34%, the business loan delinquency rate does not look alarming. It is well below its Great Recession peak of 6.75% and only 0.15 percentage points above the 10-year average of 1.19%. By historical standards, this is a normal reading.
But historical standards are the wrong benchmark when you are trying to figure out what happens next. The direction matters more than the level, and the direction is clearly upward: increases in 3 of the last 4 quarters, a year-over-year climb from 1.27% to 1.34%.
That 5.5% year-over-year increase is the kind of slow, persistent deterioration that credit analysts watch carefully. It is not a spike -- spikes are dramatic and draw attention. This is a grind higher that can continue for quarters before anyone outside the banking system notices.
Every major delinquency crisis in the FRED dataset started exactly like this. In 2007, business loan delinquencies sat at 1.19% -- lower than today's reading. Within 18 months they had tripled. In 2015, the rate bottomed at 0.75% and then doubled to 1.60% by early 2016 as the energy sector collapsed.
The current move from a trough of 0.97% in Q1 2023 to 1.34% today follows the same pattern: a slow, steady climb that accelerates when a specific sector or shock hits. The question is not whether the rate is high. It is whether the trend has further to run.
The Senior Loan Officer Opinion Survey (SLOOS) shows that 15 consecutive quarters of net tightening have occurred, with 8.9% of banks reporting tighter standards for C&I loans in the latest survey. That is the credit supply side responding to what they see in their own loan books.
Tighter standards have a delayed effect on delinquency. When banks raise the bar for new loans, the marginal borrowers who would have been approved six months ago now cannot get bank credit. Some turn to merchant cash advances at effective APRs of 60-350%. Others cut spending. Both outcomes increase fragility.
If you run a business that depends on bank credit -- a revolving line for inventory, an equipment loan, a real estate loan for your facility -- the rising delinquency rate means your next credit review will be tougher. Banks use aggregate delinquency data as one input into their risk models. Even if your own payment history is perfect, rising system-wide delinquencies make underwriters more cautious.
How business loan delinquencies compare to other categories at U.S. commercial banks:
| Loan Category | Current | Prior Qtr | QoQ Change | Year Ago | YoY Change |
|---|---|---|---|---|---|
| Business Loans (C&I) | 1.34% | 1.33% | +0.01pp | 1.27% | +0.07pp |
| Commercial Real Estate | 1.58% | 1.56% | +0.02pp | 1.56% | +0.02pp |
| Consumer Loans | 2.62% | 2.71% | -0.09pp | 2.76% | -0.14pp |
| Credit Cards | 2.94% | 2.98% | -0.04pp | 3.08% | -0.14pp |
| All Loans (total) | 1.48% | 1.49% | -0.01pp | 1.53% | -0.05pp |
The business loan delinquency rate is 1.34% as of Q4 2025, based on Federal Reserve FRED series DRBLACBS (seasonally adjusted). This measures C&I loans at all FDIC-insured commercial banks that are 30+ days past due.
The rate has been rising. It increased from 1.27% in Q4 2024 to 1.34% in Q4 2025, a year-over-year increase of 0.07 percentage points. The trend is upward, with increases in 3 of the last 4 quarters.
The all-time peak in the FRED dataset was 6.75% in Q2 1987. The current 1.34% is roughly 5x lower. But the pre-crisis rate in early 2007 was just 1.19% -- lower than today -- which shows how fast things can change.
Rising delinquencies cause banks to tighten credit standards. Expect harder underwriting, lower credit limits, more collateral requirements, and higher spreads. Businesses that relied on easy credit may find renewal terms significantly worse.
The Federal Reserve counts the dollar value of C&I loans 30 or more days past due at all FDIC-insured commercial banks, divided by total C&I loans outstanding. The series is seasonally adjusted and published quarterly.
Revenue shortfalls, margin compression, overleveraging, and sector-specific downturns (energy in 2015-16, retail during COVID). Rising interest rates also increase debt service costs on variable-rate credit facilities, pushing marginal borrowers into delinquency.