Commercial and Industrial Loan (C&I)

A commercial and industrial (C&I) loan is credit extended by a bank or financial institution to a business for any purpose other than real estate. C&I loans fund working capital needs, equipment purchases, business expansion, inventory buildup, operating lines, and other corporate obligations. They represent one of the two primary categories of commercial bank lending, alongside commercial real estate (CRE) loans, and make up a significant share of total bank lending at approximately $2.7 trillion outstanding as of Q4 2025.

C&I facilities take multiple structural forms: revolving credit lines, term loans, demand loans, and committed operating facilities. Most C&I loans carry variable interest rates that reprice quarterly (or monthly) off a benchmark, either the Prime Rate (currently 6.75% ) or the Secured Overnight Financing Rate (SOFR). The spread above the benchmark depends on borrower creditworthiness, collateral quality, facility size, and the overall banking relationship, typically ranging from 1.50% to 4.00% above the reference rate.

The Federal Reserve tracks C&I lending through several distinct channels. The Senior Loan Officer Opinion Survey (SLOOS) captures lending standards and demand on a quarterly basis. Delinquency and charge-off rates for C&I loans are reported separately from CRE and consumer credit (FRED series DRCLACBS for delinquency, CORLACBS for charge-offs), giving regulators and market participants a precise read on credit quality in the business lending sector. As of Q4 2025, the C&I delinquency rate stood at 2.62%, declining from a cycle high of 2.77% in Q1 2025.

C&I loans are the dominant form of bank credit available to operating businesses. When you apply for a commercial term loan, a revolving line, or a working capital facility at a commercial bank, you are entering the C&I lending channel. Understanding how that channel functions, and how banks are managing their C&I portfolios right now, directly affects the terms you can negotiate and the likelihood of approval.

Because most C&I facilities carry variable rates, your cost of capital moves with the benchmark. A $1 million revolving line priced at Prime + 2.00% costs $87,500 per year in interest at today's 6.75% Prime. If Prime rises 75 basis points, that same facility costs $95,000, an increase of $7,500 annually with no change to the loan terms. Borrowers who understand the fixed vs. variable rate trade-off can structure C&I facilities with rate caps, fixed-rate tranches, or swap overlays to manage this exposure.

C&I delinquency and charge-off trends also serve as a barometer for what banks will do next. When C&I delinquencies rise, banks tighten underwriting standards, widen spreads, and reduce approval rates, often before borrowers feel any economic slowdown in their own revenue. Conversely, falling delinquencies, like the current decline from 2.77% to 2.62%, signal improving credit quality that typically loosens the lending environment over the following quarters. Monitoring these indicators gives you a timing advantage in your capital planning.

Treating C&I as a specific product rather than a category. C&I is a regulatory classification, not a loan type. It encompasses revolving lines, term loans, demand facilities, and operating credit across every industry. When a banker mentions a "C&I loan," ask which structure they are proposing and compare it against specific products like a business line of credit or an SBA-guaranteed facility.

Ignoring variable rate exposure. The majority of C&I facilities reprice quarterly off Prime or SOFR. Borrowers who budget only for the initial rate can face payment shock when benchmarks move. Always model a stress scenario: if your benchmark rises 100 to 200 basis points, can your cash flow absorb the increase? If not, negotiate a rate cap or explore SBA fixed-rate options.

Confusing C&I loans with CRE loans. Banks report and underwrite these as separate categories. A C&I facility secured by business assets (receivables, inventory, equipment) is evaluated on cash flow and profitability. A CRE loan secured by property is evaluated on property value and rental income. Applying for the wrong category wastes time and can lead to suboptimal terms.

Overlooking covenant packages. C&I facilities, especially revolving lines, routinely include financial covenants: minimum debt service coverage, maximum leverage ratios, tangible net worth floors. A covenant violation triggers default provisions even when payments are current, potentially accelerating the entire balance due.

Reading only headline C&I data. The SLOOS breaks out lending standards by borrower size. Small firms (generally under $50 million in annual revenue) frequently face tighter conditions than large and mid-market borrowers within the same quarter. The headline aggregate can mask the conditions your business will actually encounter.