In a lending landscape clouded by uncertainty, Oakworth’s Chief Economist John Norris is focused on one thing: pricing risk.
As geopolitical tensions rise and interest rates remain elevated, small-business owners face mounting challenges in securing affordable credit. Norris offers timely insight on what banks are watching, why lending standards are tightening, and why now may be the moment to act—before the window of opportunity begins to close.
Story Highlights
- Banks may tighten lending standards as economic uncertainty increases.
- Business owners face challenges obtaining credit because of high rates.
- Experts advise caution when taking on new or non-traditional debt.
As chief economist for Oakworth Capital Bank, a big part of John Norris’ role is pricing risk.
In the current environment that’s swelling with uncertainty, it’s an increasingly complicated task.
When banks plan out the year, they figure out how many loans they want to make, and when pricing in risk, Norris said they tend to be a bit more backward looking. That means that despite the current turmoil over tariffs, banks are still looking to make loans at a steady pace.
But that could change quickly as the impact of tariffs and economic uncertainty facing businesses starts to show up in the data.
Then, banks will begin to tighten their underwriting and credit standards, especially in industries that may be hardest hit.
“Banks are going to be a little bit leery once they see what they see — kind of a slowdown in the economy,” Norris said. “I think it’s all systems go until then.”
His advice? Small businesses worried about funding should secure it now. But small-business owners are having a tough time obtaining new credit, with high interest rates largely — but not solely — to blame for steeper costs.
The Federal Reserve Bank of Kansas City in a recent survey found new term loans for small businesses dropped 9% in the fourth quarter of 2024 compared to the same time in 2023. Of those new loans, total balances dropped by 5.6%.
Additionally, lending standards, as judged by the Federal Reserve Bank of Kansas City, tightened for the 13th quarter in a row.
But for the first time since 2022, loan demand grew at the end of 2024, with a net 4% of lenders that responded to the Federal Reserve Bank survey reporting stronger loan demand. Still, that increased demand was correlated with more rejections, and the credit quality of loan applicants also dropped for the 11th quarter in a row.
In short, more business owners are eager to obtain a loan, even though fewer might qualify.
(This article is available to subscribers of https://www.bizjournals.com/. Read the full article, published on Apr. 30, 2025, here. )