Taking the Temperature of Business Lending

By Larry Feld, Contributing Writer On May 14, 2025

In terms of bank lending activity, data collected by The Federal Financial Institutions Examination Council (FFIEC) under the Community Reinvestment Act (CRA) reveals that banks in 2022 issued $2.8 billion in loans to New Jersey businesses with revenues of $1 million or less. In total, new loans (of $1 million or less) in that year reached $8.5 billion.

There is no doubt that things have changed in the last 12 months. From interest rates and the economy to the national political shift, it seems like an appropriate time to ask lenders for insights on securing the best funding situation. 

So, what do bankers think about the current business climate?

“I think that the business sentiment for our clients in New Jersey is generally positive,” says Joseph Lebel, president and chief operations officer at Toms River-based OceanFirst Bank N.A.

“For those in need, banks have been generally responsive,” he continues. “However, I think a lot of businesses still have concerns about their ability to compete, hire the right talent, and access technology. AI, for example, is on everyone’s mind both as a concern and as an opportunity.”

“New Jersey’s small businesses are holding up well, even in spite of challenges that have been coming their way recently,” adds Keith Suchodolski, chief operating officer for Kearny Bank. 

“When we look at our existing client base and new loans, we are lending actively. We see many strong businesses out there that are well-run and operating with a strong cash flow,” he says.

While there is optimism, there is also caution and uncertainty.

“There is some uncertainty in the market right now that is hindering businesses from growing where they might have otherwise,” Suchodolski explains. “It’s hard to take on new debt when you don’t know what direction things are going, whether it’s the economy, rates, or inflation. Some businesses have taken out lines of credit but haven’t drawn on them in ways that we’ve seen in the past. They’re just holding it in reserve for when they see the opportunity.”

In recent weeks, uncertainty over tariffs imposed by the Trump administration on some of New Jersey’s key import/export partners, including Canada, Mexico, and China, has piqued concern for some businesses – at least for the short term. 

OceanFirst’s Lebel agrees, noting that actions by the Department of Government Efficiency (DOGE) and other political and governmental theatre make short-term business predictions impossible.

“In early January, we were expecting some deregulation from the Trump administration. I might have said that we were looking at a strong year in lending, and perhaps even some renewed interest in mergers and acquisitions. Two weeks later, DOGE and tariffs started shaking things up, and immediately the conversations changed,” says Lebel, explaining that predictions are difficult in this uncertain environment.

What About Interest Rates?

“There was a period of shock when rates ramped up so aggressively,” Suchodolski says. “We saw angst among our borrowers when rates went from near zero to seven, eight, and even nine percent. I think that shock has been absorbed to some extent. Reality has set in, and people have adjusted. Businesses have acclimated to what that means.”

“Businesses have concluded that rates are going to be higher for longer, that the expectation of rates going to drop substantially is not going to occur,” Lebel adds.

“We do still expect two or three rate cuts in the second half of the year, depending on the economy. But even with those cuts, they’re going to be small, perhaps a quarter point each. So adversely, borrowing costs aren’t going to be markedly different,” he notes.

“In terms of the five to ten-year Treasury notes, I think you’re going to see the range of 4.25% to 5%, depending on sentiment. We’re going to see some volatility, but I think it’s going to be a banded range,” Lebel says.

Suchodolski has a similar opinion on long- and short-term rates. “Typically speaking, you look at the inflation rate and then you add one to two percentage points, and that’s where short-term rates usually land. Add another one or two percentage points, and that’s where long-term interest rates land. And that’s a very back-of-the-napkin kind of assessment,” he explains.

“However, if the Federal Reserve is committed to getting inflation back to 2%, we should not see short-term interest rates higher than 3.5%. If so, long-term rates may be a little higher,” Suchodolski contends.

Competition and Lending Availability

Bankers agree that it is a healthy market for lending to small businesses. If bankers have concerns, it is the emerging influence of less regulated private equity players in their space. While in the past, equity lenders dealt mainly with larger businesses, recent growth has expanded their footprint into mid-size and smaller businesses, including technology, pharma, and Fintech.

“Everybody is saying: ‘We’re in the market. We want to lend money. We want to be successful,’” Lebel says.

“I think if there’s anything new, it is the private debt market. These are non-banks. That market is growing exponentially and competes with the public markets. These private equity funds and debt funds are funded by private investors, culminating in a trillion-dollar market. There’s a lot of money and capital, and it tends to be unregulated.” 

According to Lebel, private equity’s nimble business model has changed the regulated banking industry by forcing decisions to happen faster. 

Expectations and Best Practices

Bankers say they are willing and waiting to lend to businesses, so what do businesses need to know when shopping for a loan or new line of credit?

“Obviously, customers are seeing a more expensive rate, but they are not seeing much in the way of more or stricter lending criteria,” notes Suchodolski. “However – and this is nothing new – there is a renewed focus by banks to ask for the client’s full banking relationship. That means deposits, loans, and even personal business. In this environment, deposits are so valuable that they are almost a greater focus than the lending business.”

For businesses that have never reached out to a bank for credit or a loan before, Lebel offers some additional practical advice:“If you’re a small business that has never really borrowed a lot of money, the key is to have a business plan that makes sense. Understand your strengths and weaknesses. Talk to people who you trust, whether it’s your accountant, your attorney, or if you have a banker already that you trust, and get their buy-in.”

To access more business news, visit NJB News Now.

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