This week's news: Banks cut spreads harder for the tier above you, a deduction from 2022 comes back in full on next month's return, small group health filed a 14 percent median increase, the overtime box on your 2026 payroll has to be mapped before year end, and lending rules tighten on October 1.
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In the July senior loan officer survey, a net 25.0 percent of banks reported narrowing spreads on business loans to firms above $50 million in sales. For firms below $50 million the figure was 14.5 percent. Standards themselves barely moved. Three months earlier both groups were tightening. This is the first quarter of broad price easing after two quarters going the other way.
Nothing in that came from the Fed. Prime has sat at 6.75 percent since December and the target range has not moved. The easing is bank competition, and it is being handed out unevenly by size. On $8 million of floating debt, a line plus a term loan, fifty basis points is $40,000 a year. On a $3 million revolver alone it is $15,000. The window is your renewal date.
Do not read the survey as a forecast, because it is a record of what banks already did last quarter. Do not open the conversation by asking for a better rate, which invites a no. Do not assume your banker will raise it, because on the conventional side the spread is their margin and there is no version where volunteering it helps them.
A company doing $60 million has a treasurer who reads that survey and knows the market cleared 25 percent net easing on spreads. A company doing $25 million has a controller who receives a renewal letter and signs it. The 10.5 point gap between those two figures is not a quirk of the data. It is the price of not asking, and it is charged again at every renewal, to the same borrower, for as long as nobody opens the file. Banks are not doing anything improper here. They are quoting to the level of scrutiny they expect from the borrower in front of them.
There is a second fact worth carrying into the room. Commercial and industrial balances contracted in July for the first time all year, down 1.1 percent annualised, after growing at double digits through the spring. Banks need earning assets. Meanwhile the same week, two mid-market revolvers repriced publicly at SOFR plus 137.5 to 212.5 and SOFR plus 112.5 to 212.5, with unused fees in the teens and covenants at 3.0 times leverage and 1.25 times fixed charge coverage. Those are comparables. Walking into a renewal with a published survey and two named deals is a different conversation from walking in with a request.
Federal Reserve: the July 2026 senior loan officer survey, with net percentages split by firm size · Federal Reserve: the April 2026 survey, showing the tightening quarter that preceded the turn · ABF Journal: the July contraction in commercial balances and named mid-market repricings with full spread grids · Prime Rate: the current prime of 6.75 percent, unchanged since December 11, 2025
Tax law forced businesses to capitalise and amortise domestic research and development costs over five years starting in 2022. That was repealed. Revenue Procedure 2025-28 lets any taxpayer, at any revenue size, recover the entire remaining unamortised 2022 to 2024 balance on the 2025 return, either all at once or spread across 2025 and 2026. The separate route for amending old years closed on July 6.
The definition is wider than owners think. It is not lab coats. It is software development, engineering, prototyping, and wages for product and process development. A $25 million manufacturer with $1.2 million a year of qualifying spend carries roughly $2.0 to $2.4 million unamortised into 2025, which is $420,000 to $500,000 of federal cash tax at 21 percent before state. The election is a statement attached to the return. No Form 3115.
Do not assume this does not apply because you do not have a research department, since the costs are ordinary engineering and software wages. Do not leave it to be raised at filing time, because by then the return is going out the door. Do not take the full acceleration without asking what it does to your loss carryforward and your interest deduction limit first.
Continuing the existing amortisation schedule requires no statement, no analysis, no client conversation and no exposure for the person preparing your return. Accelerating requires them to compute the balance, model what a large deduction does to your loss position and your interest limitation, coordinate it with the research credit and the related election, and attach a statement, all in the fortnight before an extended return is filed. At $10 million to $50 million your return is prepared by a good regional firm treating this as a compliance line. The silent option is free for everyone except you, and once the return is filed the choice is made.
So make it a question rather than a hope. Three sentences to your CPA this week. What is our unamortised domestic balance carried into 2025. Are we taking it fully in 2025, splitting it across 2025 and 2026, or defaulting to continued amortisation, and why. Does full acceleration create a loss we can only use against 80 percent of future income, or collide with the interest deduction limit. There is a real answer where continuing to amortise is correct, usually when the deduction would strand. But it should be an answer, not an omission.
Grant Thornton: that all taxpayers regardless of size may recover the balance in 2025 or across 2025 and 2026 · BDO: the full mechanics, election statements, deemed elections and the absence of audit protection · KLR: the three options in plain language and the interest limitation interaction · KBKG: the July 6 amended return deadline and the gross receipts test that governed it
Small group insurers have filed a 14 percent median rate increase for 2027, up from 11 percent for 2026, across 295 insurers in all fifty states. A quarter filed at 10 percent or below and a quarter at 18 percent or above. The medical trend underneath is 10.8 percent, so roughly three points of the increase is not care cost at all. It is the pool getting worse.
On a hundred-life group carrying around $1.6 million of annual premium, the difference between accepting 14 percent and landing at 8 percent is about $96,000. Level funded arrangements went from 2 percent of small group enrolment in 2021 to over 11 percent in 2025, and fully insured small group enrolment fell 41 percent between 2013 and 2024. The healthy groups left. You are paying for the ones who could not.
Do not treat the renewal as arithmetic to be approved, because it is the largest controllable line you touch all year. Do not ask your broker whether self funding makes sense without knowing they are paid on premium. Do not cross fifty full-time equivalents without checking what it does, since in most states it moves you out of community rating and into the employer mandate in the same month.
A 14 percent renewal pays a percentage-of-premium broker 14 percent more. That is not an accusation, it is an arithmetic fact about how the person advising you is compensated, and it means the file that would shrink your premium is the one file they have no reason to open. Below fifty employees this barely matters, because the rate is community rated and there is nothing to negotiate. Above fifty it matters enormously, because you have entered an underwriting conversation you have never had to have, against a counterparty who does this every day, advised by someone paid on the number going up.
So change what you ask for. Not a better rate, which is a request. Ask for three quotes side by side: fully insured, level funded, and self funded with stop loss, each with the broker's compensation disclosed in dollars rather than percent. Ask what your own claims experience actually looks like, because at a hundred lives you have credible data and the pool average is no longer your best estimate. And if you are near fifty full-time equivalents, get the count nailed down before the renewal rather than after, because crossing it changes which market you buy in and switches on employer mandate penalties of $3,780 and $5,670 in the same stroke.
Peterson-KFF Health System Tracker: the 2027 small group filings, quartiles and the level funding migration · Becker's Payer Issues: independent confirmation plus the commercial trend and pharmacy cost figures · KFF: the 2027 individual market filings that set the alternative, and the employer survey baseline · Trusaic: the 2027 employer mandate penalty amounts that switch on above fifty
An August fact sheet confirmed the 2025 transition relief on overtime reporting does not extend. For tax year 2026, employers must report the overtime premium separately in Box 12 using code TT, and an employee may not claim the deduction on any amount the employer fails to report there. Pay stubs do not substitute. The substitute W-2 form is not a workaround.
Only the federal premium qualifies, the extra half above the regular rate. State daily overtime, seventh day rules, double time, contractual overtime and shift differentials do not. Get the mapping wrong and the penalty is charged twice, once for the agency copy and once for the employee copy, at $340 each. At 150 employees that is $102,000. Above $5 million of receipts you do not get the small business cap.
Do not assume your payroll provider handled it, because they built the field and cannot know which of your earning codes are federally required premium. Do not leave non-discretionary bonuses out of the regular rate, which under-reports the box and creates a separate wage claim. Do not wait until February, when the same error costs five times more to fix.
At thirty to two hundred and fifty people the payroll runs on a mid-market provider who ships the code TT field and announces it in a release note. What they cannot know is which of your earning codes represent federally required premium and which are state law, contractual or discretionary. That mapping is a judgment about your own pay practices, and in most companies this size nobody owns it. The controller assumes payroll handled it. The person handling people assumes the controller checked. The owner never sees it. The failure surfaces in February 2027 when employees who were told their overtime would not be taxed find a blank or wrong box and cannot claim it.
The correction economics are the reason to look now rather than then. Fixed within thirty days it is $60 a return. Corrected by the following August it is $130. After that it is $340, doubled because the same wrong form is penalised on both copies. That is a 5.7 times swing decided entirely by whether somebody opens the payroll configuration in September instead of February. And there is a version where it cannot be fixed at all: if your timekeeping kept only gross overtime dollars rather than hours over forty and the regular rate inputs, the year cannot be cleanly rebuilt. Check that first, because it determines whether this is a configuration job or a bigger one.
IRS Fact Sheet 2026-13: the controlling guidance on code TT, the end of relief and the federal-premium-only definition · IRS Revenue Procedure 2025-32: the penalty tiers and caps for returns filed in 2027 · Experian Employer Services: what changed on the 2026 form, including the new codes and the box 14 split · Barnes Dennig: the regular rate and non-discretionary bonus mechanics with a worked calculation
New lending rules were issued on August 14 and take effect for any 7(a) loan that receives its agency loan number on or after October 1. The coverage floor on acquisitions and partner buyouts rises from 1.15 times to 1.25 times. Projections no longer count toward the test, which must be proved on historical results. Any purchase price at or above $3 million now requires a lender-commissioned quality of earnings report.
At $1.2 million of adjusted cash flow, 1.15 times supports about $1,043,000 of annual debt service and 1.25 times supports $960,000. That is 8 percent less loan, roughly $400,000 on a $5 million deal, which becomes equity the buyer has to find. It runs the other way too: if you are the seller, every buyer closing after October 1 supports less debt, and that lands on your price.
Do not assume signing an application locks the old rules, because the cliff is keyed to the date the agency issues the loan number, not the date you applied. Do not leave the question implied, since a file sitting in a queue can drift across the date with nobody telling you. Do not read this as only affecting buyers, because at this size the most common use is a partner buyout.
Everything written about this change is aimed at search funds and lenders, so it reads like it belongs to somebody buying a small trades business. The mechanism that actually bites at $10 million to $50 million is the partner buyout, which is the most common use of this financing at your size and is explicitly one of the categories moving to the higher historical coverage test. The second trap is the trigger. It is not the application date, not the term sheet, not the credit approval. It is the date the agency issues a loan number, which sits with your lender's processing queue and is invisible to you unless you ask.
Your lender has no obligation to tell you your file is at risk of slipping, and with a full pipeline in the last five weeks of the fiscal year, no particular incentive either. That is not a scandal. It is why the question has to come from you, in writing, this week, in one sentence: will my file have an agency loan number before September 30. If the answer is anything other than yes, you are structuring against the new test and should reprice now rather than in October. A quality of earnings report at this deal size runs roughly $6,000 to $25,000 and takes weeks, so on a $3 million or larger purchase it is also a scheduling problem, not just a cost.
SBA: the notice issuing the revised standard operating procedure and its October 1 effective date · PilieroMazza: the underwriting changes, the coverage move and the $3 million quality of earnings trigger · OpsFi: the deal categories with their coverage floors side by side and what the report must contain · Security Bank and Trust: an old rule against new rule comparison including seller notes and consulting periods
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