Middle Market Growth reports tighter collateral terms on bank term loans

Middle Market Growth reported Oct. 8 that banks are tightening collateral requirements on term loans and auditing more closely how borrowers use existing credit lines. The publication attributes both shifts to Federal Reserve SLOOS survey data from April 2025, about 18 months older than the Oct. 8 report. It traces the shifts to stress tests and risk committees inside banks adjusting their appetite.

The piece concludes that a middle-market company may find fewer of its assets are financeable even when credit is nominally available. Its distinction is between capital that exists and capital a borrower can borrow against; banks are still lending, it says, but the change sits in how underwriting treats collateral.

Most of the piece is a first-person argument by a lender for its own framework, which it calls the 5Cs of capital readiness: character, capacity, cash flow, collateral and conditions. The contention is that underwriting against pledgeable assets and projected cash flow alone leaves out reputation, structural fit and embedded trust, qualities the author says senior lenders' models were never built to count. It names two cases, a Test of Character and a Test of Capacity, as illustrations.

The article does not report figures. Its account implies that if banks demand more coverage on term loans and monitor line utilization more closely, borrowers whose assets fall outside a revised collateral schedule have to fund the difference elsewhere. Non-bank lenders are the obvious destination.