2025 Lending Insights Published January 14, 2025

2025 looks like a big year ahead for lenders. How can you prepare? 

With the new year underway, the lending landscape is poised to undergo significant shifts driven by changes in federal government leadership, a turning of the tides in government policy, and evolving macroeconomic conditions.

Keeping this in mind, it’s essential for lenders to stay ahead of key trends that will impact their business so they can make informed decisions and navigate the complexities of the 2025 lending environment.

Government agency shifts

Rapidly changing political climate and transitions in government leadership will impact lenders at the federal level. With the new Trump administration taking office in January 2025, lenders will need to adjust to a shifting regulatory environment, particularly as it pertains to the IRS and the Small Business Administration (SBA). 

The incoming administration will likely focus on cutting funding for the IRS, a move that has been a long-standing campaign promise for many Republicans. This could slow or even halt the modernization efforts initially launched under the Inflation Reduction Act, potentially hampering the agency’s ability to efficiently serve taxpayers and businesses. With fewer resources, the IRS may struggle to meet the growing demands of the lending community, making it a more arduous process to obtain and verify important tax documents for potential borrowers. 

At the same time, the new administration appointed Kelly Loeffler as the new head of the SBA, which could bring about significant changes to small business lending policies. Even seemingly minor shifts in the SBA’s Standard Operating Procedures (SOP) can have far-reaching effects on lenders and borrowers. These shifts may introduce new regulations, impact how loans are processed, and alter eligibility criteria for borrowers. 

Continuing interest rate uncertainty

Interest rates are expected to decline in 2025, but how much and how quickly remains uncertain. Most experts predict the Federal Reserve will cut rates, potentially bringing them as low as 3%, though some data suggests rates could stay closer to the current range of 4.5% – 4.75%.

The Fed’s decisions will depend on inflation and the job market. While inflation is lower than its peak, it’s still above the target of 2%, and the Fed will continue working to bring it down. If the job market weakens, the Fed may cut rates more quickly to avoid a recession. However, if the job market stays strong, the rate cuts may be slower and more cautious.

For lenders, these changing rates create both opportunities and risks. As borrowing costs drop, demand for loans is expected to rise. 

Lenders should closely monitor economic indicators and Fed policy as interest rates remain in flux. Staying ahead of these changes will not only help manage risk but also position lenders to seize growth opportunities.

Responding to an economy that’s picking up speed, and quickly.

As inflation continues to cool and economic conditions improve, small businesses are likely to ramp up operations, leading to a spike in demand for financing. For lenders, this means being prepared for a fast-paced environment, where quick responses will be critical to meeting the demands of borrowers.

A recovery-driven environment means businesses will seek capital to resume growth or make long-awaited investments. Those who can respond swiftly with tailored solutions — responding to the needs for working capital, expansion, or specialized equipment — will have a competitive edge.

As the economy accelerates, lenders will need to keep up, staying ahead of demand by refining payment processes, leveraging new technology, and providing solutions to borrowers with speed and efficiency. The pace of recovery won’t wait for anyone, and those who aren’t ready to act risk missing out on key opportunities.

As 2025 unfolds, lenders will face an increasingly dynamic market. At Tax Guard, we specialize in providing the insights and due diligence necessary to help you manage the risks associated with lending. We’ve been at this since 2009, weathering multiple administrations, economic ups and downs, a pandemic, and more with our customers; through it all, we’ve been there to assist no matter what. Our knowledgeable team is here to support you through whatever is ahead to ensure you’re well-equipped to succeed in a rapidly changing landscape.