What are commercial lending trends?
Commercial lending trends are evolving patterns in corporate finance that are driven by economic
conditions, technological advancements, and regulatory changes. The key developments include digital lending and automation, where fintech and
artificial intelligence play a significant role. Intelligence simplifies loan approvals and risk analyses.
Beyond traditional financial institutions and alternative lending sources, including peer-to-peer funding
and online lenders, are opening access.
Lending with an eye toward ESG is growing; banks are choosing companies that complement sustainability
initiatives. Rising rates of interest are influencing borrowing expenses, which makes companies more wary.
Customized loan products and embedded finance solutions are becoming increasingly popular because they
provide flexible, industry-specific funding choices for companies of all kinds.
Are Customers Waiting for Better Lending Conditions?
While the economy is not in recession, many Americans are worried about it. Unemployment is down, GDP
is on the rise, and the Fed’s move to increase interest rates is pushing inflation
down.
Of course, interest rates have been at their highest
in 22 years, at 5.25-5.5%. Subjective perceptions and steep interest rates have naturally made
businesses wary of borrowing, and small businesses are especially concerned about their capacity to
weather economic flux if they take on more debt.
However, loan
volumes did increase by 0.25% in March of this year , indicating that banks are loosening their
lending policies in response to an improving economic outlook. And let us not forget the record number of
business registrations—they will need funds more than now and then, and commercial lending volumes
may not remain depressed for long.
These are conditions where customized, personalized, and flexible lending solutions become paramount.
The Allure of Personalization Alone—in Commercial Lending
Commercial lending is no longer about lending alone—businesses want services that help them manage
their finances better as well. They want real-time financial data about their debt obligations, custom
dashboards, easy access to relationship managers, and bespoke loan products.
This commercial lending trend is the result of a broader change in customers’ borrowing
preferences. Today’s customers are used to services that blend human and digital interaction and
anticipate, rather than address, their needs. They have similar expectations from their commercial
lenders. According to a report by Capco, 72% of customers want and value personalized commercial services.
Many are willing
to pay for digital alerts about recurring payments but also desire one-on-one conversations with
bank representatives rather than a chatbot for guidance. Those who rate personalization as “highly
important’ are also willing to share feedback on their experiences. All the evidence indicates that
they value digitization, but not when it becomes a barrier to smooth operations.
Such a clientele would undoubtedly prefer flexible loan terms, proactive outreach, transparent online
communication, and simplified and digitized application processes. This is why KPMG suggests not just a
core modernization of commercial lending processes, but a broader digital transformation of a
lender’s operations.
But technology integration doesn’t just address the customer’s needs. It also helps lenders
navigate an increasingly complex and stringent regulatory environment.
The need for advanced credit decision-making models
While borrowers value personalization, sophisticated credit decision models are all but necessary for
players to thrive in the current commercial
lending landscape. Transitioning to such new models is not easy. Many banks face challenges due to
limited data sources, simple analytical tools, reliance on subjective assessments, outdated and inflexible
models, and concerns about time-to-implementation and regulatory scrutiny.
However, adopting
such models gives stellar results—they have boosted revenue by 5-15%, decreased credit losses
by 20-40%, and improved efficiency by up to 40%. Automating many aspects of the assessment process and
eliminating much of the paperwork helps quickly identify the right customers and improve their experience
using straight-through processing. Accurate predictions of default risk help lenders figure out how much
capital and provisions they need to keep on hand. Case prioritization through automation also lets lenders
spend more time evaluating high-risk but otherwise favorable prospects.
Those who adopt and refine new credit decision-making models gain a competitive advantage while remaining
compliant with regulatory strictures, retain more customers who value the improved user experience, and
minimize risk through segmentation. The advent of advanced credit decisioning models is a trend in
commercial lending that answers the needs of borrowers and lenders.
The Tightening Regulatory Landscape
Early in 2023, almost half of senior loan officers at major U.S. banks said they were tightening credit
standards for commercial and industrial loans because of risks in the economy and specific industries. The
increase was mostly because of stricter state and federal regulations.
This commercial lending trend is quite recent—the US government has not traditionally regulated
commercial lending, while consumer loans were governed strictly by laws such as the Truth in Lending Act
(TILA). Now, commercial lenders must comply with new regulations and guidelines introduced at both the
federal and state levels, without the sort of uniform
framework of a law like TILA.
Tightening regulations are part of a broader push for increased oversight in the financial sector.
Regulators seek to enforce sound lending practices where institutions must manage all sorts of risks,
ranging from cybersecurity and data privacy to environmental sustainability. Lenders are also pressured to
ensure their practices are not just compliant but also aligned with broader societal attitudes about
climate change, social responsibility, and corporate governance. The regulatory landscape is fragmented
and fraught with challenges.
According to a KPMG
report, commercial lenders rate regulatory compliance as one of the primary drivers for transforming
their operating models and processes. Digital transformation automates and standardizes compliance
processes, ensures data accuracy and privacy, and is agile enough to adapt to shifting regulatory trends.
Technology aimed at addressing a lender’s regulatory burden has been dubbed "RegTech’ and is a
solution not only to regulatory tightening but also to the risks that come with increasing
personalization, flexible loan terms, and meeting other borrower expectations.
Lenders are not just updating their tech infrastructure to meet regulatory challenges. They are trying to
make sure that their tech stack is future-proof in terms of customer needs, regulatory changes, and other
technological advances in the financial sector.
The adoption of cutting-edge technology
Technology is now a crucial part of the commercial lending industry. Lenders are using digital tools to
boost efficiency and reduce costs while improving the customer’s experience with more personalized
services.
At the heart of digital lending processes is automation—and this covers everything from loan
origination and underwriting to servicing—and when combined with analytics, it also helps lenders
and borrowers engage better with each other—AI and machine learning are helping to identify
high-potential customers and also tailor products to their needs.
From speeding up approvals to fulfilling compliance requirements, lenders are resorting to technology to
meet business demands. Technology can automate loan document reviews, flag exceptions, and even ensure
adherence to regulations, both local and federal, letting underwriters focus on higher-value tasks.
Advanced analytics is also helping lenders deal better with risk. Parsing vast amounts of data from
multiple sources gives them a comprehensive overview of a borrower’s financial health.
Commercial lending is also becoming more digital thanks to open banking and Application Program Interface
(API) integration. These two new technologies make it easier for financial institutions and other service
providers to share data, which is beneficial for both the lender and the borrower because it creates an
interconnected financial ecosystem.
A McKinsey study has revealed that 75%
of the world’s top 100 banks now offer public APIs. For instance, the consumer division of a
major financial services company launched a global API hub, allowing developers to share best practices.
APIs like Plaid and Yodlee are now commonplace in small-business lending, allowing borrower data to be
directly integrated with lenders' systems. Such integration not only improves the speed and accuracy of
credit decisions but also allows lenders to offer more personalized and flexible solutions to borrowers.
Technology does not just benefit the lender—it also gives borrowers what they want. Borrowers
expect easy access to information and personalized services. Lenders who can deliver this type of
experience are more likely to attract and retain customers in an increasingly competitive market.
RegTech, AI, data analytics, open banking, and API integration—all these top commercial lending
trends in 2025 form part of a wider digital transformation in the financial services sector. It is not
without its challenges, but it brings significant rewards. A McKinsey report states
that such a transformation drives much faster credit decisions so customers receive cash up to 80%
faster, lowers costs by cutting decision-making time by 30–50% and improves risk decisions, ensuring
greater long-term profitability.
The Rise of Sustainable Finance
Sustainable finance is now on the rise because of a growing consensus on environmental, social, and
governance principles (ESG). Both businesses and investors are incentivized to prioritize sustainability,
and this has led to a greater focus on sustainable finance.
The issuance of green, sustainable, and social bonds reached
a record $6 trillion in 2022, underscoring the growing demand for financial products that support
sustainability initiatives.
This trend is not just restricted to the US but is a worldwide phenomenon and suggests that a business is
more likely to receive funding if it is a green initiative and that it is more likely to thrive if it
adopts sustainable practices. Lenders have also done their research and come to the same conclusions. This
is why financial products like green loans and sustainability-linked loans (SLL) were created. These
products encourage borrowers to set and meet certain social or environmental goals.
According to the Wilmington Trust, sustainability-linked loans could become more popular. This is because
any loan can have terms that change if the borrower doesn't meet certain sustainability objectives.
However, both green loans and SLLs are subject to stringent
regulatory criteria and are not free of risks. A KPMG report on ESG risks strongly advises against
simplistic solutions—such as abandoning a ‘brown’ automotive supplier—because that
would only damage the lender’s reputation. supplier—
The reputation of sustainable finance is growing. It is a new trend in commercial lending that needs to
be charted carefully, and it is better to use a tech-enhanced approach to its attendant risks rather than
outdated business practices.
The Case for a Complete Digital Solution for Commercial Lending
Given the commercial lending trends we have discussed, the need for an end-to-end commercial lending software
platform is evident. The combination of shifting customer sentiment, tightening regulations,
and the adoption of technology underscores the importance of a comprehensive digital solution. Such a
platform would streamline
the entire commercial lending lifecycle, from application to compliance, risk management, and loan
servicing.
Technology integration is already underway, driven by both customer demand and regulatory pressures.
Borrowers are increasingly seeking software-enabled solutions that offer personalized experiences and
simplify the lending process. At the same time, the complexity of the regulatory landscape requires
automated tools that can handle compliance and de-risking with precision and efficiency.
In today’s market, an end-to-end commercial lending software platform represents the natural
evolution of an industry that has to constantly hit a moving target, simplifying processes for
borrowers, addressing the complexity of regulatory norms, and managing risks both old and new. For lenders
looking to stay competitive and meet the demands of modern borrowers, investing in a complete digital
solution is the logical next step.
Conclusion
An end-to-end commercial lending platform is perhaps the only answer to the contradictory commercial
lending space. New business applications are at a record high, but so are US interest rates. Though it
seems to be happening piecemeal, technological transformation is already under way. Borrowers want
personalized and streamlined experiences, but their satisfaction requires precise credit decision-making
models. Compliance requirements change from state to state—unheard of until recently. Strengthening
satisfactory lending and ESG principles is rapidly coming to the forefront but is also subject to serious
risks. Financial institutions have to capitalize on current trends or risk becoming obsolete.
While our platform provides an end-to-end solution, it is not a universally applicable product. From loan
origination and underwriting to reporting and precise analytics, our automated solution propels revenue
generation. By smashing silos with a digitized lending platform, our services enable our customers to
maximize growth and operational efficiency. Our granular customer insights allow our clients to scrutinize
every prospect thoroughly, making informed commercial lending decisions.
While our platform provides a comprehensive solution, it is not a universally applicable product. We
cover the gamut of commercial lending—loan origination, underwriting,
reporting, and precise
analytics—propelling revenue growth. We smash silos with our digitized lending platform; our
services help our customers operate more efficiently, and our customer insights enable our clients to
scrutinize every prospect thoroughly, ensuring that no customer is underserved.
Will such a platform manage to resolve the contradictions in the commercial lending sector? Yes.
People are also reading:
