New Hampshire’s small businesses face mounting challenges as the lending environment tightens amid economic uncertainty. Recent data from the Federal Reserve Bank of Boston shows a 12% decline in small business loan originations across the Granite State in the last quarter, a trend concerning both entrepreneurs and economic observers.
“We’re seeing a definite slowdown in applications and approvals,” says Jennifer Merrill, senior vice president of commercial lending at a Manchester-based community bank. “Business owners are more hesitant to take on debt when they’re unsure about where the economy is heading.”
This caution comes as New Hampshire’s economy displays mixed signals. The state’s unemployment rate remains below the national average at 2.8%, yet inflation continues to pressure profit margins and consumer spending shows signs of weakening. According to the New Hampshire Business Finance Authority, applications for small business guarantee programs dropped 15% compared to last year.
The Federal Reserve’s interest rate policies have directly impacted borrowing costs. Small Business Administration (SBA) loans now typically carry rates between 7.5% and 9.5%, up significantly from the 4% to 6% range in 2021. For businesses operating on thin margins, these increases can make expansion plans financially unfeasible.
“We had plans to open a second location this year, but we’ve put everything on hold,” explains Thomas Rodriguez, owner of a Portsmouth-based specialty food shop. “Between higher interest rates and unpredictable customer spending, the numbers just don’t work anymore.”
Community banks and credit unions, traditionally the backbone of small business lending in New Hampshire, report tightening their underwriting standards. A survey by the New Hampshire Bankers Association reveals 65% of member institutions have increased documentation requirements for business loans, while 58% now require higher cash reserves from applicants.
The economic uncertainty extends beyond interest rates. Supply chain disruptions continue to plague sectors from manufacturing to retail, making inventory management and cost projections challenging. Labor shortages persist across hospitality, healthcare, and skilled trades, further complicating business expansion plans.
Michael Skelton, president of the Business and Industry Association of New Hampshire, notes this lending slowdown comes at a critical time. “Small businesses create nearly 70% of new jobs in our state. When they can’t access affordable capital, it doesn’t just hurt those individual companies—it has ripple effects throughout our communities.”
The geography of the slowdown shows notable patterns. Rural counties like Coos and Sullivan are experiencing sharper declines in lending activity than the more populous southern regions. The New Hampshire Small Business Development Center attributes this partly to the concentration of financial institutions in urban areas and the higher costs of serving rural entrepreneurs.
However, some financial institutions are developing innovative approaches to address the challenging environment. Enterprise Bank recently launched a microloan program specifically designed for businesses with under $500,000 in annual revenue, offering streamlined applications and more flexible terms. Similarly, the New Hampshire Community Loan Fund has expanded its technical assistance programs to help businesses strengthen their financial positions before seeking traditional loans.
“We’re helping business owners understand that this might be a time to focus on efficiency and profitability rather than pure growth,” explains Katherine Wheeler, a business advisor with the NH SBDC. “Sometimes the best strategy isn’t borrowing more but maximizing what you already have.”
State officials recognize the potential economic implications of the lending slowdown. The Department of Business and Economic Affairs is evaluating new incentives to encourage financial institutions to maintain small business lending volumes, including possible risk-sharing arrangements.
“New Hampshire’s economy depends on its small business ecosystem,” says Taylor Caswell, commissioner of the Department of Business and Economic Affairs. “We’re looking at every tool available to ensure businesses can access the capital they need to weather this period of uncertainty.”
For entrepreneurs caught in this challenging environment, adaptation has become essential. Some are turning to alternative funding sources like revenue-based financing or equity investments. Others are forming purchasing cooperatives to strengthen buying power or exploring shared service models to reduce overhead costs.
Economic forecasts for the region remain cautiously optimistic despite these challenges. The New England Economic Partnership projects modest growth for New Hampshire over the next 18 months, though at rates below pre-pandemic levels. The organization cites the state’s diverse economic base and relatively strong fiscal position as stabilizing factors.
As fall approaches, typically a time when businesses begin planning for the following year, many New Hampshire entrepreneurs find themselves in a holding pattern—neither expanding nor contracting, but carefully monitoring economic conditions before making significant financial commitments.
“The businesses that will thrive through this period are those with the flexibility to adapt and the discipline to manage costs without sacrificing quality,” observes Skelton. “New Hampshire’s small business community has proven resilient before, and I believe they’ll do so again.”
