U.S. companies drew down bank credit lines in the run-up to President Donald Trump’s April 2 “Liberation Day,” presumably to build up inventories and strengthen financial positions ahead of new tariffs.
However, the prospect of higher tariff rates and uncertainty amid a series of back-and-forth announcements on trade policy are dampening projections for lending activity for the remainder of 2025. U.S. commercial and industrial (C&I) loan volumes increased 0.38% from January to February 2025 and then rose another 0.37% from February to March.
New data from Crisil Coalition Greenwich supports the notion that increased commercial borrowing was tied to inventory positioning in advance of tariffs. In February, roughly a quarter of the commercial executives surveyed in a recent Greenwich Market Pulse said they expected their companies’ financing need to increase. Nearly two-thirds of those executives said the additional financing would be needed for working capital and cash flow management—needs likely related to maintaining inventory levels, purchasing more inventory before costs increase, covering increased operating costs, restructuring supply chains, and other issues tied to tariffs.
“Some bankers widely perceived Q1 loan growth as being tied to companies’ efforts to get imported products on the water and build up inventories before the imposition of steep new tariffs,” says Gregory Schneider, Director, Commercial Loan Analytics (CLA) at Crisil Coalition Greenwich.
Weaker Projections for Future Loan Growth
After April 2, banks and analysts began trimming expectations for loan growth in the midst of a series of announcements from the Trump administration that imposed tariffs, paused tariffs, created exemptions for tariffs, and threatened new tariffs on individual countries and products. Reflecting that sentiment, banks and analysts began lowering future loan growth estimates.
According to data from Visible Alpha, a part of S&P Global Market Intelligence, analyst projections for 2025 median annual growth rate in net loans for the 20 largest U.S. public banks dropped 49 basis points between March 31 and April 29, ending at 2.5%. Estimated growth for all U.S. banks trading on a major exchange fell 54 basis points to 4.3% over the same period, further supporting the more pessimistic outlook on loan demand post-tariff announcement.
Spreads on Floating-Rate C&I Loans Widen as Risk Levels Tick Up Slightly
Data from Crisil Coalition Greenwich’s Commercial Loan Analytics (CLA) shows that spreads on SOFR-based C&I loans started to climb in Q1 2025 after a steady decline of roughly 10 basis points over the course of 2024, Average SOFR spreads increased slightly, by about three basis points, across low-, medium- and high-risk buckets. CLA data also shows slight increases in overall risk levels for new originations compared to mid-year 2024.
“The small uptick in pricing can be partly explained by two factors: heightened credit risk, which lenders are compensating for through increased pricing, and lenders being proactive about the potential economic stress ahead, which has contributed to tighter credit standards,” says Gregory Schneider.
Commercial Lending Market Insight is a quarterly review of data and analytics from the CLA team at Crisil Coalition Greenwich.