Commercial Pulse Report | 05/19/2025
The latest Experian Commercial Pulse Report reveals a complex but fascinating picture of the U.S. economy and the small business landscape. According to Javier Rodriquez-Paiva’s research, while headline indicators suggest moderation, like slowing inflation and a steady unemployment rate, beneath the surface, disparities in recovery and credit performance continue to deepen. Here’s a breakdown of this week’s major findings.
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A Cooling Economy: GDP Contracts, Sentiment Slides
The most attention-grabbing headline this cycle is the 0.3% contraction in Q1 GDP, marking the first quarterly decline since Q1 2022. The Bureau of Economic Analysis attributes the dip to a surge in imports ahead of anticipated tariffs, which disrupted the trade balance and weighed on growth.
Meanwhile, inflation continues to cool. March’s inflation rate landed at 2.4%, down from 2.8% in February, while core inflation—excluding food and energy—fell to 2.8%, its lowest level since 2021. This may offer some relief to consumers and businesses alike, but consumer sentiment dropped sharply to 52.2 in April, reflecting growing unease. It was the fourth consecutive monthly decline, and the lowest reading since July 2022.
Labor Market Holds Steady
Despite the GDP dip, the job market appears stable. April’s unemployment rate held at 4.2%, while the U.S. added 177,000 jobs—a slight slowdown from March, but still a positive sign. Wages rose again, averaging \$31.06 per hour, indicating that employers continue to compete for talent even as other indicators cool.
Small Business Index Ticks Up, Optimism Holds
The Experian Small Business Index rose to 47.2 in March, up from 45.4 in February. That’s the third consecutive monthly increase, signaling moderate optimism among small business owners. However, the index remains 9.3 points below last year’s level, reflecting broader economic uncertainties.
Still, the environment for new ventures remains strong. In March alone, over 452,000 new business applications were filed—a 6.4% increase from February. The rate of business starts has remained significantly elevated since the pandemic, a trend that continues to bolster the small business ecosystem.
K-Shaped Recovery: The Uneven Road Ahead
One of the most critical insights from this report is the continued evidence of a K-shaped recovery—where higher-income households and affluent communities are thriving, while lower-income groups and businesses face mounting financial strain.
Experian’s research shows:
- The top 1% of households have seen income grow over 500% since 1979, while the bottom 20% have only grown by 31%.
- The top 10% hold over 67% of total U.S. wealth, while the bottom 50% hold just 2.4%.
- Retailers in affluent ZIP codes are showing stronger credit performance, including lower delinquency rates, better credit scores, and fewer derogatory filings compared to their peers in low-to-moderate income areas.
These patterns aren’t just numbers—they highlight structural challenges for economic equity and raise questions about how future policy and credit access strategies should evolve.
What This Means for Lenders and Business Leaders
For commercial lenders and business decision-makers, the takeaway is clear: understanding the geographic and demographic context of credit risk has never been more important. The divergence in recovery paths demands more nuanced credit assessment and customer support strategies.
With new business formation still booming and small business owners showing resilience, there are real opportunities—but also growing gaps in financial well-being that could impact portfolio performance over time.
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The U.S. small business landscape is undergoing a structural transformation — and commercial lenders may need to rethink what a “small business borrower” looks like. According to Experian’s May 26th, 2026 Commercial Pulse Report, new business formations remain at historically elevated levels, averaging approximately 450,000 per month since the pandemic. That pace represents a 54% increase compared to pre-pandemic averages from 2018 and 2019. Watch the Commercial Pulse Update According to Experian’s latest Commercial Pulse Report, new business formations remain at historically elevated levels, averaging approximately 450,000 per month since the pandemic. That pace represents a 54% increase compared to pre-pandemic averages from 2018 and 2019. But perhaps more importantly, the composition of those businesses has changed dramatically. In early 2026, approximately 93% of newly formed businesses were sole proprietorships, up from 85% in 2018. Many of these businesses have no employees, limited operating history, and different borrowing behaviors than the traditional small businesses lenders historically underwrote. That shift is creating a fundamentally different commercial credit environment. A Different Kind of Small Business Owner Historically, many small business lending models were designed around businesses with employees, established operations, recurring revenue streams, and longer credit histories. Today’s wave of new businesses often looks very different. Many newer firms are being launched by individuals pursuing consulting work, freelance opportunities, side businesses, creator-economy income streams, or post-retirement self-employment. These businesses may operate leaner, carry lower fixed costs, and rely more heavily on revolving credit products rather than traditional financing structures. In many cases, the business owner and the business itself are financially intertwined. That evolution matters because underwriting a sole proprietor is not the same as underwriting a mature operating company. The rise in sole proprietorships is being driven by several long-term labor force and demographic trends now reshaping the U.S. economy. Demographic Shifts Are Driving Entrepreneurship One of the most important forces behind the surge in sole proprietorships is the aging U.S. population. By 2050, individuals aged 55 and older are projected to represent nearly 40% of the total U.S. population. At the same time, Americans are increasingly working later in life. Labor force participation among older workers has steadily increased over the past two decades, while participation among younger workers has trended lower. Retirement itself is also evolving. Many retirees are no longer fully exiting the workforce. Instead, they are remaining economically active through part-time consulting, contract work, side businesses, and self-employment arrangements. According to research highlighted in Experian’s report, 59% of workers expect to continue working during retirement, while 61% of recent retirees express interest in continued employment. These trends are contributing to a growing segment of “microbusinesses” — businesses with few or no employees operating primarily around the skills, experience, or services of an individual owner. At the same time, broader workplace dynamics are also influencing entrepreneurial activity. Employee Engagement Is Falling According to Gallup, employee engagement in the U.S. and Canada declined to 31% in 2025, down from post-pandemic highs. Gallup estimates that low engagement costs the global economy nearly $10 trillion in lost productivity. Younger workers in particular appear increasingly affected by workplace stress, burnout, and changing expectations around flexibility and career mobility. As a result, more individuals may be pursuing alternative work arrangements, independent income streams, or self-employment opportunities. The side-hustle economy continues to expand as well. A recent PYMNTS study found that nearly 20% of workers engaged in regular side work during the previous six months. Collectively, these labor force dynamics are reshaping not only how Americans work, but also how small businesses are formed, financed, and evaluated from a credit perspective. Commercial Credit Usage Looks Different Experian data shows meaningful differences in how smaller and larger businesses use commercial credit. Smaller businesses and sole proprietors rely more heavily on commercial credit cards, while larger firms tend to utilize a broader mix of leases, lines of credit, and term loans. Businesses with four or fewer employees received average commercial card credit lines of roughly $8,900 in 2025. By comparison, businesses with more than 100 employees averaged approximately $29,500 in new commercial card credit lines. Even when loan origination rates appear similar across business sizes, loan amounts differ substantially. Businesses with fewer than four employees averaged approximately $119,000 in term loan originations, while larger businesses averaged closer to $268,000. Risk performance differs as well. Larger firms generally continue to demonstrate lower delinquency rates and stronger commercial credit scores, reflecting greater operational scale, more established financial histories, and broader access to capital. Why Risk Models May Need to Evolve For lenders, these shifts present both opportunity and complexity. The surge in new business formation creates potential growth opportunities across commercial credit markets. However, many of today’s borrowers may not fit historical underwriting assumptions. Traditional business risk models often relied heavily on factors associated with mature operating businesses — payroll size, years in business, trade depth, and established commercial borrowing history. Today’s newer firms may instead require a more blended view of risk that incorporates both commercial and consumer-level behaviors, cash flow dynamics, and alternative indicators of financial stability. As sole proprietors and microbusinesses continue to account for a growing share of the small business economy, lenders may need to remain agile in balancing portfolio growth with disciplined underwriting and risk management strategies. The definition of “small business” is evolving — and commercial risk models may need to evolve alongside it. Learn more ✔ Visit our Commercial Insights Hub for in-depth reports and expert analysis. ✔ Subscribe to our YouTube channel for regular updates on small business trends. ✔ Connect with your Experian account team to explore how data-driven insights can help your business grow. Download the Commercial Pulse Report Visit Commercial Insights Hub Related Posts
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