Small business index trending higher Small businesses are increasingly seeking capital through alternative sources. Fintech lenders and embedded finance platforms have gained momentum, offering faster application processing, data-driven underwriting, and flexible repayment structures.
Experian Main Street Q2 2025 report findings
U.S. small businesses are demonstrating exceptional adaptability amid a complex post-pandemic economic environment. Inflation remains elevated above 3%, interest rates are steady between 4.25% and 4.50%, and global trade dynamics continue to introduce volatility. Despite these pressures, small firms are showing resilience, driven by improved digital capabilities, disciplined fiscal management, and a steady flow of entrepreneurial activity. In Q2 2025, an average of 447,000 new business applications were filed, with significant contributions from minority and younger founders.
The Experian Small Business Index™ held steady, credit conditions remained tight. Traditional lenders continued to restrict approvals, with just 13% of applications approved by large banks. In response, small businesses increasingly turned to fintech and embedded finance solutions for faster, data-driven access to capital. Borrowing behaviors are shifting. The average small business credit card APRs now exceed 25%, firms are transitioning toward installment loans that offer structured repayment terms.
Credit and Lending Climate Tighter Access, Smarter Strategies
The Experian Small Business Index™ remained stable in Q2 2025, reflecting steady credit demand among U.S. small businesses. Access to capital remains uneven. Lenders are cautious, with big banks approving just 13% of small business loan applications and tightening credit standards amid persistent economic uncertainty. Approval rates are constrained in interest-sensitive sectors such as construction, retail, and professional services.
Small business index trending higher Small businesses are increasingly seeking capital through alternative sources. Fintech lenders and embedded finance platforms have gained momentum, offering faster application processing, data-driven underwriting, and flexible repayment structures.
These solutions are playing a growing role in bridging the financing gap for businesses that lack strong traditional banking relationships or collateral. Credit utilization has held steady, but borrowing behavior is shifting. Average credit card APRs exceeding 25%, business owners are moving away from revolving debt and toward structured financing options such as term loans or merchant cash advances.
Commercial APR begins to plateau
AVG Commercial APR: This transition reflects a broader focus on predictability and cost control. Delinquency trends are also shifting. While consumer and small business credit delinquencies have declined year over year, lenders have not significantly loosened underwriting criteria. According to the April 2025 Senior Loan Officer Opinion Survey (SLOOS), banks maintain more conservative terms, including smaller credit lines, higher risk premiums, and stricter loan covenants. These measures respond to regulatory pressure, rising capital costs, and ongoing macroeconomic uncertainty.
Financially constrained firms, especially those with subprime credit profiles, are seeing the cost of capital rise sharply.
Subprime borrowers now face credit card APRs over 30%, further straining margins and prompting a reassessment of financing strategies. Businesses with strong credit management practices are better positioned to access more favorable terms.
Credit Underwriting Policies slow to loosen
Net % of Banks Tightening Lending Standards. To support repayment and reduce delinquency risk, lenders offer incentives such as 0% APR introductory periods, balance transfer promotions, and credit score management tools. These strategies aim to preserve portfolio performance while providing temporary relief to borrowers.
As businesses plan for 2026, effective credit management and strategic capital sourcing will be essential. In a climate of higher borrowing costs and selective underwriting, demonstrating financial discipline, maintaining healthy utilization rates, and leveraging digital financial tools will be a competitive advantage.
Entrepreneurship & Formation
Momentum Continues, Foundations Strengthen. According to U.S. Census Bureau data, entrepreneurial activity remained elevated in Q2 2025, with 457k new business
applications filed in June alone. This sustained level of business formation, well above pre-pandemic averages, signals durable momentum across Main Street, even amid macroeconomic uncertainty.
New Business Formation Applications (seasonally adjusted) set a new baseline north of 400K
Sources: U.S. Census Bureau
A notable share of these applications fall under the category of High-Propensity Business Applications (HBAs), up 3.3% month over month in June, indicating a high likelihood of transitioning into employer firms. This trend suggests growing confidence in long-term business viability and reflects improved planning and readiness among new entrepreneurs.
Several structural tailwinds are supporting this expansion:
- Low unemployment and rising wages have contributed to household financial stability, creating a more favorable environment for business formation.
- Digital infrastructure gains and the normalization of remote work have lowered entry barriers, particularly for service-based and e-commerce ventures.
- Alternative financing sources, including community lenders and fintech platforms, provide broader access to capital for early-stage businesses.
The Experian Small Business Index™ confirms this optimism, with steady credit application volumes despite tighter lending standards. Minority and younger founders continue to play a critical role in this expansion, contributing to a more diverse and distributed entrepreneurial landscape.
About the report
Experian Main Street Report brings deep insight into the overall financial well-being of the small-business landscape, as well as provides commentary on what specific trends mean for credit grantors and the small-business community. Critical factors in the Main Street Report include a combination of business credit data (credit balances delinquency rates, utilization rates, etc.) and macroeconomic information (employment rates, income, retail sales, industrial production, etc.). To read the full report click here.
