Small business lending in 2025 is growing fast. Loan demand is up. More businesses are applying for credit. And alternative lenders are stepping in to fill the gap where banks are tightening standards.
But many of these businesses are also carrying more risk than they were a year ago. Input costs have gone up. Supply chains are still inconsistent. Consumer demand is shifting. And some industries are feeling it more than others.
Understanding which businesses are under the most pressure can help lenders prioritize applications, adjust pricing, and avoid surprises down the road.
What the data says about lending right now
In 2024, the SBA approved over $31.1 billion in loans, up 13% from 2023. But that momentum is not evenly spread. Many small businesses are still struggling to find affordable, timely capital. Forty-four percent didn’t apply for financing because they thought they’d be denied. And only 14.6% of loan applications were approved by big banks.
Even among those who did get financing, satisfaction is slipping. High interest rates and rigid repayment terms continue to frustrate borrowers, especially those working with online lenders. Meanwhile, nearly 40% of small businesses now carry more than $100,000 in debt—up from pre-pandemic levels.
Small businesses need faster, more flexible options. That’s why demand for alternative lending is increasing. But with that demand comes a need for better risk visibility.
The 10 riskiest small business industries right now
Based on recent shifts in trade policy, consumer behavior, and supply chain patterns, these industries are showing the most signs of elevated risk. They may still be worth lending to—but they require a closer look.
- New Car Dealerships (441110)
Tariffs and shipping delays are pushing up vehicle costs and limiting inventory. - Full-Service Restaurants (722511)
Higher food and labor costs are cutting into margins, while foot traffic remains unpredictable. - Clothing Stores (448140)
Reliance on imported goods makes it harder to manage cost and availability. - Furniture Stores (442110)
Inventory turnover is slowing due to rising shipping costs and inconsistent supply. - Home Centers (444110)
Construction inputs are more expensive, and many customers are delaying non-essential projects. - Toy & Hobby Stores (459120)
Discretionary spending is slowing and supply chains remain fragile for seasonal inventory. - Liquor Stores (445310)
Import costs are increasing and local demand patterns are shifting. - Bookstores (459210)
Print media continues to decline, while input costs for physical products go up. - Drycleaners (812320)
Demand hasn’t recovered and operating costs are still rising. - Travel Agencies (561510)
Uncertainty in travel habits and high overhead make it hard to forecast reliable revenue.
What lenders should take away from this
Many of the businesses listed above might still pass traditional credit models. But models built on last year’s data don’t always reflect what’s happening today. Tariffs, rising operating costs, and shifting consumer behavior often don’t show up in financials until it’s too late. A business may look healthy on paper while quietly facing major disruptions in real time.
Alternative and embedded lenders are well positioned to meet growing demand—but only if they pair speed with sharper risk insight. Approval rates are falling. Credit quality has declined for 11 straight quarters. And banks continue to tighten terms. In this environment, agility is everything.
The most successful lenders are staying proactive—tracking current market signals, flagging emerging industry risks, and adjusting their approach as conditions evolve. That flexibility isn’t just about reducing downside risk. It’s also how you find the right borrowers, at the right moment, and build a stronger, more profitable portfolio.