In banking, C&I stands for Commercial and Industrial, and it refers to loans that banks make directly to businesses to fund their operations rather than to buy real estate or cover personal expenses. It is one of the largest lending categories in the U.S. financial system: commercial banks held roughly $2.8 trillion in C&I loans as of early 2026.1Federal Reserve Economic Data. Commercial and Industrial Loans, All Commercial Banks (BUSLOANS) If you have seen the term in a bank’s earnings release, a Federal Reserve report, or a loan officer’s pitch, that is what it means.
How Regulators Define C&I
The FDIC describes C&I lending as “secured or unsecured credits to business enterprises for commercial and industrial purposes,” a bucket that covers working capital advances, term loans, and loans to individuals when the money is used for business.2Federal Deposit Insurance Corporation. Commercial and Industrial Lending The more precise definition sits in the Call Report instructions every bank follows when reporting its loan book to regulators. Those instructions say C&I loans go to “sole proprietorships, partnerships, corporations, and other business enterprises, whether secured or unsecured, single-payment or installment.”3Federal Deposit Insurance Corporation. FFIEC 051 RC-C – Loans and Leases
The list of qualifying borrowers is wide. It includes manufacturers, mining and oil companies, construction firms, transportation and communications businesses, wholesalers and retailers, for-profit service businesses like hotels and hospitals, insurance agents, and professionals such as lawyers, doctors, and accountants.3Federal Deposit Insurance Corporation. FFIEC 051 RC-C – Loans and Leases SBA-guaranteed loans count as C&I when the money is being used for a commercial or industrial purpose. The category is deliberately broad so that almost any loan funding a business operation lands inside it.
What C&I Is Not: CRE and Consumer Loans
C&I is defined as much by what it excludes as by what it includes, and two neighboring categories account for most of the boundary.
The first is Commercial Real Estate, or CRE. A CRE loan finances a property, and the property itself secures the debt. A loan to buy an office building, a warehouse, or a retail center is CRE, underwritten against the property’s value and income. A C&I loan, by contrast, funds the business operating inside that building. The Call Report instructions explicitly carve out loans that “meet the definition of a loan secured by real estate” from the C&I category.3Federal Deposit Insurance Corporation. FFIEC 051 RC-C – Loans and Leases The same company can hold a CRE loan on its factory and a separate C&I loan for the inventory and equipment inside.
The second is consumer lending, which covers borrowing for household, family, or personal needs.4eCFR. 12 CFR 160.3 – Definitions A dentist who borrows to buy imaging equipment for the practice has taken out a C&I loan. The same dentist borrowing to buy a personal car has a consumer loan. Purpose, not borrower, sets the category.
The Main C&I Loan Structures
The FDIC’s examination guidance groups C&I lending into three primary forms, each built around a different business need.5Federal Deposit Insurance Corporation. Commercial and Industrial Lending Examination Modules
Working capital lines of credit are short-term facilities, generally lasting no longer than a year, meant to fund seasonal swings in inventory and receivables. A retailer might draw in September to stock shelves for the holidays and pay the line down in January as sales revenue arrives.
Revolving lines of credit finance permanent working capital. Unlike a seasonal line meant to zero out at some point in the cycle, a revolver can stay partially drawn for long stretches. It is the closest institutional analogue to a credit card.
Term loans are fixed-amount loans repaid on a set schedule, typically used to buy equipment, finance an acquisition, or restructure an existing facility that did not pay down as planned. Repayment schedules usually match the useful life of the asset being financed, so an equipment loan may amortize over five to seven years while acquisition financing can run longer.
How C&I Loans Are Secured
C&I loans can be secured or unsecured, and the regulatory definition explicitly allows both.2Federal Deposit Insurance Corporation. Commercial and Industrial Lending In practice, most involve some form of security, but the collateral looks very different from a real estate mortgage.
The usual collateral is the business’s own operating assets: accounts receivable, inventory, equipment, and sometimes intellectual property. For asset-based loans, lenders set a borrowing base, a formula that ties available credit to a percentage of eligible receivables and inventory plus the discounted value of equipment.5Federal Deposit Insurance Corporation. Commercial and Industrial Lending Examination Modules The borrowing base gets recalculated regularly, so available credit can shrink if a major customer leaves or inventory values fall.
Revolving lines are often secured by a blanket lien on all business assets.5Federal Deposit Insurance Corporation. Commercial and Industrial Lending Examination Modules The bank files a UCC-1 financing statement with the state to put other creditors on notice, which is how priority gets established: a later lender using the same collateral can see who was there first. Smaller and mid-sized businesses are also frequently asked to sign personal guarantees, putting the owner’s personal assets on the hook if the business cannot repay.
Almost every C&I loan agreement also includes financial covenants, which are performance tests the business must keep passing throughout the life of the loan. Common ones include maintaining a minimum debt-service coverage ratio (banks often set the floor at 1.2 to 1.25, meaning the business generates 20 to 25% more cash than it needs to cover loan payments), keeping leverage below a ceiling, and limits on taking on additional debt. A breach does not necessarily mean the business is failing, but it triggers a conversation with the bank and can lead to tighter terms.
How C&I Loans Are Priced
Most C&I loans carry variable interest rates tied to a benchmark. The two dominant benchmarks are the Secured Overnight Financing Rate (SOFR) and the bank prime rate. As of late 2025, prime stood at 6.75%.6Federal Reserve Economic Data. Bank Prime Loan Rate A loan priced at prime plus 1% would carry a 7.75% rate that adjusts each time prime moves. Larger, more creditworthy borrowers tend to get tighter spreads over SOFR; smaller or riskier businesses pay wider margins over prime.
Variable rates cut both ways. A one-percentage-point increase on a $2 million revolving line adds $20,000 a year in interest expense straight out of operating cash flow, and many borrowers underestimate that exposure.
Fees layer on top of interest. Revolving facilities typically charge an unused commitment fee on whatever portion of the line has not been drawn: a $5 million line with $2 million outstanding still generates a small annual percentage fee on the remaining $3 million. Banks may also charge origination fees, annual administrative fees, and prepayment penalties on term loans.
Why C&I Lending Is Watched So Closely
Economists and central bankers pay close attention to C&I lending because business borrowing reveals corporate confidence in a way surveys cannot. When companies borrow to build inventory and buy equipment, they are staking real money on the belief that demand is coming. When they pull back, it often signals that executives see trouble.
The Federal Reserve’s Senior Loan Officer Opinion Survey, published quarterly, tracks both the supply and demand sides of the C&I market. The July 2025 survey reported that a modest share of banks had tightened their C&I lending standards, citing “a less favorable or more uncertain economic outlook” and “increased concerns about the effects of legislative changes.” Demand from businesses of all sizes had weakened at the same time, with banks pointing to lower customer investment in plant and equipment as the main driver.7Board of Governors of the Federal Reserve System. The July 2025 Senior Loan Officer Opinion Survey on Bank Lending
Tighter supply combined with weaker demand tends to slow growth: capital that would have funded hiring, inventory, and equipment stays on the sidelines. The reverse pattern, loosening standards and rising demand, generally precedes expansions. The roughly $2.8 trillion outstanding in C&I loans is, in effect, a running measure of how much confidence the banking system and the business community have in each other at any given moment.1Federal Reserve Economic Data. Commercial and Industrial Loans, All Commercial Banks (BUSLOANS)