Discover key Leisure & Hospitality trends, including 181% growth in credit inquiries, record travel demand, and insights for risk leaders.

First-party fraud is rising across commercial lending. Learn how fraud trends, AI, and dark web activity are reshaping fraud risk management.

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

Commercial office space businesses show strong credit performance despite rising vacancies. Explore key trends shaping risk, demand, and resilience.

AI-driven energy demand is reshaping credit risk. Learn how rising energy costs may impact small business performance and lending strategies.

Experian Commercial Pulse explores how AI is changing credit risk with a fascinating study of high-impact AI industries.

Understand the credit dynamics of women-owned small businesses and their critical role in the growth of the U.S. economy.

Banking transformation is accelerating through consolidation, digital adoption, and AI innovation. What must CROs prepare for next?

Experian's Construction Industry Risk Model Offers Greater Precision for CRO's Construction is building momentum in 2026 — but capital is becoming more selective just as demand accelerates. For Chief Risk Officers, this is not simply a growth story. It is a risk calibration moment. For Chief Risk Officers and commercial lenders, that combination creates a complex credit environment: expanding opportunity on one hand, rising sector-specific risk on the other. This week’s Commercial Pulse Report highlights why construction deserves close attention — and why traditional risk tools may not be sufficient in the current cycle. Watch The Commercial Pulse Update A Growing Sector with Structural Tailwinds Construction contributes approximately 4.8% of U.S. GDP and remains a foundational industry supporting infrastructure modernization, AI-powered data centers, renewable energy expansion, and multifamily housing demand. Since Q1 2013, the number of construction firms in the U.S. has grown by 28%, reaching nearly 950,000 establishments. Employment in the sector has increased 49% since January 2010, reflecting both demand expansion and increased new business formation. Construction spend peaked at just over $2.2 trillion in April 2024, contracted 3.3% in 2025, and is forecast to rebound 7% in 2026 to exceed $2.1 trillion. Construction businesses seek credit more than twice as often as companies in many other industries — a structural dynamic that fundamentally alters how risk signals should be interpreted. From a growth perspective, the fundamentals remain solid. Non-residential construction is particularly strong, driven by: AI-powered data center buildouts Renewable energy infrastructure Public infrastructure modernization Regional population and job growth For lenders, that growth trajectory signals continued credit demand — especially for working capital, equipment financing, and project-based lending. But growth alone doesn’t define risk. Payment Friction Is Structurally Embedded While construction is expanding, it is also experiencing persistent cash flow strain. According to a 2025 industry study referenced in the report: 70% of contractors regularly face delayed payments 41% have increased their use of credit to manage cash flow 1 in 4 contractors have reduced bidding activity due to financial strain Top contributors to payment delays include: Cash flow constraints Contract disputes Administrative inefficiencies Banking and financing delays Technology and process friction Construction projects are capital-intensive and milestone-driven — meaning liquidity depends on payment timing, not just performance. When developers delay payments, the effects cascade through subcontractors and suppliers. For lenders, this creates a recurring risk pattern: strong backlog with fragile cash flow. For CROs, this creates a distinct risk profile: businesses may show strong top-line growth but experience liquidity stress due to payment timing — increasing reliance on revolving credit and short-term financing. Construction Businesses Seek and Use More Credit Experian data reveals that construction businesses: Seek commercial credit more than twice as often as non-construction businesses Maintain a higher average number of commercial trades Exhibit higher 60+ day delinquency rates compared to other industries At the same time, commercial lenders continue reporting tightened underwriting standards, particularly for small firms. This dynamic — structurally elevated credit demand colliding with tighter credit conditions — increases the need for precise risk interpretation. Elevated inquiries and higher trade counts in construction are not inherently distress signals. In many cases, they reflect the capital-intensive, project-based nature of the industry. The risk is not high credit usage — the risk is misinterpreting what that usage signals. Construction firms are not homogenous. Risk varies significantly across: Trade specialty Project mix (residential vs. non-residential) Business maturity Regional economic exposure Capital structure and utilization patterns Generic commercial risk scores may not fully capture these industry-specific nuances, increasing the potential for both over- and under-estimating risk within construction portfolios. Why Generic Risk Models Fall Short in Construction Construction presents several characteristics that can distort traditional risk assessments: High inquiry and trade activity – Elevated credit usage may reflect normal operating structure, not necessarily distress. Cyclical delinquency patterns – Project-based payment timing can temporarily inflate delinquency metrics. Industry-specific trade relationships – Supplier networks and payment practices differ from other sectors. Material cost volatility – Construction input costs have tripled since the early 1980s and remain elevated relative to pre-pandemic levels. When underwriting models are calibrated to all industries collectively, they may under- or over-estimate risk within construction portfolios. In tightening credit cycles, imprecision compounds faster: Constraining high-quality borrowers Underpricing volatile segments Misallocating capital For CROs, this is not theoretical — it is a margin issue. The Case for Industry-Specific Risk Modeling Addressing this requires industry-calibrated analytics — models built specifically to reflect construction trade behavior and payment dynamics. For example, Experian developed the Small Business Credit ShareTM model for Construction — a purpose-built commercial risk score tailored specifically to businesses with construction trades. The model: Uses advanced machine learning methodology (XGBoost) Predicts the likelihood of becoming 61+ days beyond terms within 12 months Incorporates aggregate business data, public records, trade data, and construction-specific attributes Produces a score range of 300 to 850, where higher scores indicate lower risk Performance testing shows improved KS and GINI separation compared to generic all-industry models, as well as stronger bad capture rates in the lowest scoring deciles. In practical terms, that means: Better identification of high-risk borrowers Improved differentiation among mid-tier applicants More confident credit line sizing Smarter portfolio monitoring For lenders balancing growth objectives with capital discipline, industry-optimized analytics can materially improve decision accuracy. Learn More about Experian SBCS Construction Score Strategic Implications for Chief Risk Officers As we move further into 2026, construction presents a paradox: - Strong sector growth - Elevated credit demand - Tightening lending standards - Persistent payment delays - Increased reliance on alternative capital The strategic question for CROs is not whether to participate in construction lending — it is how to do so with precision. Key considerations include: Are your underwriting models calibrated to sector-specific risk patterns? Are you distinguishing between structural credit usage and distress signals? Are portfolio limits aligned to trade-level risk differentiation? Are you leveraging machine learning where appropriate to isolate “bads” earlier? In a tighter credit market, competitive advantage often comes from accuracy — not volume. Growth Requires Discipline Construction will remain a critical growth engine for the U.S. economy in 2026. Demand is real. Infrastructure investment is accelerating. Capital needs are expanding. But so are constraints. For lenders and risk leaders, the opportunity lies in balancing participation with discipline — using analytics sophisticated enough to separate resilient operators from liquidity-stressed borrowers. The cranes are rising.Capital is tightening. In 2026, growth will be available. Precision will be decisive. 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