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[Fed Survey Shows Weak Business Loan Demand Last Quarter] ⑴ A survey released by the Federal Reserve on Monday showed that business loan demand weakened for the first time in over a year last quarter, although some borrowers sought cheaper financing options. ⑵ Banks cited reduced customer investment in plant or equipment and a shift in borrowing towards more attractive bank or non-bank financing sources as key reasons for the weakening demand. ⑶ The last survey showed softening demand for commercial loans in the second quarter of 2025, but at that time banks did not cite borrowers shifting to other lenders as a reason. ⑷ A government report last week showed that business equipment spending grew at an annualized rate of 20.9% last quarter, the largest single-quarter contribution to GDP growth in six years. ⑸ Surveyed banks indicated that standards for commercial and industrial loans to large and medium-sized enterprises remained largely unchanged, but standards for small businesses tightened. ⑹ Banks said they tightened requirements for higher-risk loans, but most terms for commercial and industrial loans were "relaxed or remained largely unchanged." (7) Analysts at Oxford Economics believe that the Fed survey's failure to show banks continuing to tighten lending standards to large corporations is encouraging. (8) They write that this is yet another reason to bet on expanding corporate investment beyond artificial intelligence. (9) This report was one of the data available to Fed policymakers at their October 27-28 meeting when they decided to keep short-term borrowing costs unchanged. (10) The most frequently cited reasons for banks indicating they were tightening commercial lending standards were a poorer or more uncertain economic outlook and worsening industry-specific problems. (11) Banks also reported a significant weakening in demand for residential real estate loans and a decline in auto loan demand, but credit card borrowing demand saw its strongest growth in four years.