This brief explains the top-down half of every credit decision, the part that happens before anyone looks at your company. Figures reflect conditions as of October 1, 2026 and cite public sources. Rates move daily and lender appetite shifts quarterly, so check the date before relying on any number here.
In August this brief said the Fed was on hold and told borrowers to stop waiting for cuts. The second half held up. The first did not. On September 16 the Fed did not cut and did not hold. It raised.
If your plan for the year assumed borrowing would get cheaper, that plan needs a new number. Here is what actually moved, in the order it reaches your file.
Layer 1: The country read
The Fed went the other way. The FOMC raised the target range by a quarter point, to 3.75 to 4.00 percent, on September 16, by a 12 to 0 vote. The statement is short and blunt: “Inflation remains elevated,” and the action “will support a timelier return to the Committee’s 2 percent goal.” It also describes activity as expanding at a solid pace, with resilient domestic spending. This was a hike into a growing economy to deal with inflation. The Fed was not reacting to a crisis.
Floating-rate debt repriced within a day. The two benchmarks that most business loans float on moved almost immediately:
| Benchmark | August 13 | October 1 | Change |
|---|---|---|---|
| SOFR | 3.62% | 3.87% | +0.25 |
| Bank prime rate | 6.75% | 7.00% | +0.25 |
If you have a revolver, an asset-based line, or a floating term loan, your interest cost is already a quarter point higher than it was in mid-September. On $2 million drawn, that is $5,000 a year. Nobody has to send you a notice for it to happen. If you are unsure which benchmark your agreement uses, SOFR vs. prime explains how to read it.
The long end moved more, and it moved first. This is the part most borrowers miss. Term debt and acquisition financing are priced off longer Treasury yields, and those did not wait for the Fed. Per the Fed’s H.15 release:
| Treasury yield | August 13 | October 1 | Change |
|---|---|---|---|
| 2-year | 4.15% | 4.78% | +0.63 |
| 10-year | 4.63% | 5.24% | +0.61 |
| 30-year | 5.21% | 5.61% | +0.40 |
The 10-year was already at 4.97% on September 14, two days before the announcement. More than half of the move happened before the Fed acted. The hike was a quarter point. The 2-year and 10-year yields, which bracket the benchmarks behind most five- and seven-year fixed rates, each rose by more than twice that.
Credit spreads widened too. Lenders charge a spread on top of the benchmark, and that spread is no longer standing still. One public gauge, the ICE BofA US High Yield spread, was 2.71 percentage points on August 13 and 3.24 on October 1. All of that widening came after September 22, when it stood at 2.68. High-yield bonds are not middle-market loans, but the series is published daily, which makes it a useful early read on how much investors want to be paid for credit risk.
Private credit portfolios were already showing strain. KBRA’s August data, which we covered in our read of its Middle Market Monthly Pulse, put its default monitor at 3.5% of borrowers, median leverage at 6.5x, and the three-month downgrade rate at 13.9%. Those readings are from before the hike. On a floating-rate loan a higher base rate goes straight into the interest bill, and KBRA put median interest coverage across its direct lending borrowers at 1.6x in its Q2 compendium.
What we do not know yet. The Fed’s most recent loan officer survey is still the July edition, which described bank standards for business loans as basically unchanged. It was taken before any of this. The October survey has not been published. Until it is, nobody can say with data whether banks tightened in response. Treat any confident claim about bank appetite this month, in either direction, as a guess.
Layer 2: What a higher rate does to the math
A rate increase does not only raise your payment. It lowers the amount of debt your cash flow can support, because lenders size loans to a coverage ratio.
Take an illustrative $5,000,000 term loan on a seven-year amortization, for a business with $1,200,000 of cash flow available for debt service:
| At 8.50% | At 9.10% | |
|---|---|---|
| Monthly payment | $79,182 | $80,699 |
| Annual debt service | $950,189 | $968,392 |
| Coverage (DSCR) | 1.26x | 1.24x |
The rates are illustrative. The gap between them is not: it is roughly the size of the move in the 10-year since mid-August. The payment difference is about $18,200 a year, which most businesses can absorb. The coverage difference is the part that matters. The same business, with the same earnings, went from clearing a 1.25x test to missing it.
A deal near the line, in other words, can be declined or resized this fall with nothing about the company having changed. Our guide to DSCR and FCCR shows how a credit team builds that ratio.
One rule change arrived at the same moment. The SBA’s revised lending rulebook, SOP 50 10 8.1, took effect on October 1 for applications assigned an SBA loan number on or after that date. According to an analysis by the law firm PilieroMazza, it raises the coverage requirement for most change-of-ownership transactions to 1.25x from 1.15x. Buyers using that program now face a higher bar and a higher rate in the same month.
What this means for your file
- Re-run your coverage at today’s rates. If your numbers were built in the summer, they are stale. Recalculate with the current benchmark before a lender does it for you.
- Find out what floats. List every facility, its benchmark, and its spread. Know what one more quarter point would cost you in dollars.
- Size the request to the new math. If the old amount no longer clears 1.25x, a smaller request that does is stronger than a larger one that needs an exception.
- Expect more documentation. Wider spreads and rising downgrades make credit committees careful. The terms beyond the rate are where that shows up.
- Do not wait for a reversal. In August the common plan was to wait for cuts. The Fed then raised. If the use of funds earns a return now, price it at today’s cost.
Sources: FOMC statement, September 16, 2026; Federal Reserve H.15 (selected interest rates) and FRED series SOFR, DPRIME, DGS2, DGS10, DGS30 and BAMLH0A0HYM2, observations for August 13, September 14 and October 1, 2026; Federal Reserve Senior Loan Officer Opinion Survey, July 2026; KBRA Middle Market Monthly Pulse (August 2026) and Q2 2026 Middle Market Compendium; PilieroMazza on SBA SOP 50 10 8.1. Next Macro Lens: November 2026, after the October loan officer survey.
Want to know how your file reads against this backdrop? Run the assessment or send us the financials and we’ll tell you where you stand. Educational only. Nothing here is an offer of credit, a commitment to lend, or advice on any specific transaction.