The Blubber

Companies are falling behind on loan payments at the fastest pace in nearly eight years, raising concerns among credit analysts that tariffs could put even more pressure on corporate finances.

Rising Corporate Loan Delinquencies

Despite a still-strong economy and steady consumer spending, businesses are struggling under persistently high interest rates. Unlike other types of debt, corporate bank loans typically have variable rates, meaning they adjust with changes in interest rates.

By the end of 2024, U.S. business borrowers were at least one month late on more than $28 billion in bank debt—an increase of $2.2 billion in the last quarter alone and $5.4 billion from the previous year, according to newly released bank regulatory data compiled by BankRegData.

These figures do not include loans from direct lenders and private credit funds, which now account for a growing share of corporate borrowing.

For bank-issued corporate loans—both to U.S. and foreign businesses—delinquency rates climbed to 1.3% at the end of 2024. While still low historically, this marks the highest level of corporate loan distress since early 2017.

Meanwhile, corporate borrowing declined by $100 billion in the fourth quarter, though part of that drop was due to a change in how regulators classify corporate loans versus loans to financial institutions.

Impact of Interest Rates and Tariffs

Many businesses had hoped for interest rate cuts in 2024 following last year’s drop in inflation and expectations that the Federal Reserve would begin easing rates. However, inflation stalled in early 2025, with consumer prices rising 3% in January—driven in part by higher food costs.

Economists now worry that new tariffs introduced by President Donald Trump’s administration could reignite inflation, potentially delaying any rate cuts from the Fed.

“Mid-size companies are going to struggle in a higher-for-longer environment,” said David Hamilton, head of capital markets research at Moody’s. “Large companies are doing fine, but more small and mid-sized businesses are facing financial strain.”

Banks Remain Cautious but Optimistic

So far, banks aren’t signaling major concerns.

“We’re the largest lender to small businesses,” said Bank of America CEO Brian Moynihan on a recent earnings call. “Our customers tell us they are optimistic.”

Corporate credit has been a strong performer for banks in the post-pandemic era. Other types of loans—such as auto loans and credit cards—began seeing higher delinquency rates soon after COVID-era protections expired, followed later by commercial real estate loans.

Corporate loan delinquencies, however, only started rising in late 2023. While the 1.3% rate is a notable increase, it remains far below the 5% delinquency rate seen during the 2008 financial crisis.

Still, most economists expect further stress for corporate borrowers in the months ahead—especially if tariffs begin to take a heavier toll.