The August Main Street Lending Report shares the latest small business lending data and trends in this unpredictable economy. In this month’s report, we see that, even through a changing labor market, cautious consumer base, and rising import costs and prices, credit quality appears to have stabilized with short-term delinquencies rising modestly and defaults falling several basis points both month-over-month and year-over-year.

To read the full report, see Equifax’s Small Business Indices Report – August 2025.

A Shifting Labor Market

One of the most prominent trends is the evident softening of the labor market. The July jobs report, which included sharp downward revisions to May and June figures, paints a picture of job growth at its slowest pace since 2010. Year-to-date job growth is historically low, making this the weakest January-to-July stretch for job creation since the Great Recession, excluding COVID-19 pandemic-related disruptions. While private sector job growth, with the exception of healthcare, is stalling, jobless claims and the unemployment rate remain relatively muted, suggesting a “no hire, no fire” environment rather than widespread layoffs.

Cautious Consumers

This slowing labor market may have had a direct impact on consumer confidence and spending. Consumer spending during the first half of the year was noticeably slower than last year. Should the labor market weaken further, a more cautious consumer could translate to reduced demand for goods and services, ultimately affecting small business revenue. This cautious consumer behavior, combined with the slowdown in hiring, could lead small businesses to continue deferment of major expansion or change.

Pressures of Rising Import Costs and Prices

Another significant factor on the horizon is the continued increase in import costs. With a new set of rules that were implemented in early August, there are new costs for U.S. importers. While these changes may reduce some of the previous uncertainty, they are beginning to exert upward pressure on prices. The core Personal Consumption Expenditures price index, produced by the Bureau of Economic Analysis, has risen month-over-month for three consecutive months, and economists anticipate this trend to continue through the latter half of the year.

Small businesses are particularly vulnerable to these rising costs. Unlike larger corporations that often have the leverage to share the cost burden with exporters or suppliers, smaller firms typically absorb a greater portion of these increased expenses. This can compress profit margins and potentially reduce a small business’s capacity to service debt, making lenders more cautious. However, small businesses have historically shown remarkable adaptability, a trait that will be crucial in navigating these new cost pressures.

Keep Your Business Goals Within Sight

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