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Small-business borrowing has not surged across the board, but the routes applicants use are changing. In the Federal Reserve Banks’ 2026 Report on Employer Firms, published March 3, 2026, 38% of firms said they had applied for a loan, line of credit, or merchant cash advance in the prior 12 months—a share nearly unchanged from the 2024 survey. Meanwhile, online fintech lenders accounted for a larger share of applicants than they did five years earlier. These findings describe employer firms in the 2025 Small Business Credit Survey, not every U.S. business or any individual borrower’s prospects.
What is changing in small-business funding?
The clearest shift is in the mix of application channels, rather than the overall share of firms seeking financing. The Federal Reserve Banks’ 2025 Small Business Credit Survey (SBCS), reported in 2026, found that 38% of firms had applied for a loan, line of credit, or merchant cash advance during the prior 12 months—nearly unchanged from the 2024 survey. The survey defines small businesses as firms with fewer than 500 employees; these results concern employer firms and should not be generalized to nonemployers, businesses outside the United States, or a particular applicant.
Among applicants, the share seeking financing from online fintech lenders rose from 17% in the 2020 survey to 29% in the 2025 survey. Large banks remained the leading application destination. The increase therefore signals a growing online channel, not that online lenders have replaced banks or that the figures measure lenders’ share of all outstanding small-business credit.
What the latest figures say—and what they do not
| Finding | How to interpret it |
|---|---|
| 38% applied for a loan, line of credit, or merchant cash advance | Federal Reserve Banks, 2025 SBCS findings published in 2026; nearly unchanged from the 2024 survey. It is an application measure for the survey population, not a count of all firms that received financing. |
| Online fintech share rose from 17% to 29% | Federal Reserve Banks, comparing applicants’ reported destinations in the 2020 and 2025 surveys. Large banks remained the leading application destination. |
| 57% of small-bank applicants were fully approved | Federal Reserve Banks, 2025 SBCS. This is an observed outcome among survey applicants, not an individual business’s odds of approval. |
| 60% of online-lender borrowers, 37% of small-bank borrowers, and 32% of large-bank borrowers said actual costs were higher than expected | Federal Reserve Banks, 2025 SBCS. These are borrowers’ comparisons with their own expectations—not average APRs, standardized total-cost comparisons, or current lender quotes. |
The cost-expectation figures make it especially important to read offers rather than infer a price ranking from survey responses. Compare the rate and whether it is fixed or variable, fees, repayment frequency, term, and total amount due using the lender’s disclosures. The survey does not establish one universal cost ranking across lender types or products.
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Approval and borrower experience are different trends
In the 2025 SBCS, small-bank applicants were more likely to be fully approved than applicants at other lender types; 57% of small-bank applicants were fully approved. Separately, applicants using banks and credit unions reported greater satisfaction than those using online lenders and finance companies. Approval describes an application outcome, while satisfaction reflects the borrower’s experience. Neither aggregate finding predicts what a particular business will be offered, qualify for, or prefer.
Funding channels include large and small banks, credit unions, online lenders, and other nonbank finance companies. A Federal Reserve Board overview published in March 2025, based on 2023 SBCS results, provides historical context on these categories and notes that some firms turn to nonbanks when seeking speed. Because that evidence is older, it should not be treated as a current market-share estimate.
Bank lending data add a separate signal
The Kansas City Fed reported on June 25, 2026, that new small-business lending in the first quarter of 2026 was higher than in the first quarter of 2025, driven by an increase in new lines of credit at large and midsized banks. This is a bank-lending indicator, distinct from the SBCS survey of employer firms and their reported application experiences. It complements the survey but should not be combined with its percentages as if both measured the same population or activity.
How SBA-backed options differ
SBA-backed financing is not one interchangeable loan. The Small Business Administration sets program rules, but borrowers generally apply through a participating lender or intermediary. The programs below differ in intended use and application route; eligibility and terms depend on current rules and lender decisions.
| Program | Purpose and route | Published maximum and key limits |
|---|---|---|
| 7(a) | SBA’s primary business loan program, delivered through participating lenders. Listed uses include working capital, eligible business-debt refinancing, real estate, equipment, supplies, and ownership changes. | Up to $5 million on the SBA program page. The amount available to an applicant depends on eligibility and lender assessment. |
| 504 | Long-term, fixed-rate financing for major fixed assets through a Certified Development Company (CDC) in collaboration with a senior lender. It is not a general working-capital or inventory loan. | Up to $5.5 million on the SBA program page; proceeds cannot be used for working capital or inventory. |
| Microloan | Smaller loans made through SBA-approved intermediary lenders. Permitted uses include working capital, inventory, supplies, furniture, fixtures, machinery, and equipment. | Up to $50,000 on the SBA program page; proceeds cannot be used to pay existing debt or buy real estate. |
The SBA’s pages describe program limits and routes, not a promise that a business will qualify or receive the maximum. Confirm permitted uses, current terms, and eligibility directly against the applicable program guidance and lender requirements. The SBA also announced a policy taking effect July 4, 2026 that allows eligible borrowers to combine up to $10 million in 7(a) and 504 financing; availability depends on that policy’s eligibility rules and current official guidance.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.A practical way to compare funding paths
Start with the business need, then compare products that can legally and practically meet it. Do not assume a survey average identifies the right structure for an individual company.
Quick Recap
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- Define the use. Identify whether the funds are for operating cash, inventory, equipment, real estate, ownership change, or another purpose. Check program restrictions before choosing a route; for example, SBA 504 proceeds cannot cover working capital or inventory.
- Set the amount and structure. Decide how much is needed and whether the need calls for a term loan, line of credit, or another structure. Match repayment timing to the business’s cash flow rather than comparing headline amounts alone.
- Check eligibility and application route. For conventional financing, review the lender’s requirements. For SBA-backed financing, identify the relevant program and apply through its participating lender, CDC, or microloan intermediary as applicable.
- Compare complete cost and repayment terms. Review rate structure, fees, payment frequency, maturity, and total repayment from actual offer documents. A reported cost being higher than expected is not a substitute for an APR or a side-by-side quote.
- Weigh experience alongside approval. Use survey findings as context about applicant outcomes and reported satisfaction, not as a forecast of an individual application’s result.
Sources and scope
- Federal Reserve Banks, 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey, published March 3, 2026.
- Federal Reserve Banks, Small Business Credit Survey portal.
- Federal Reserve Bank of Kansas City, Small Business Loan Demand Increases, June 25, 2026.
- Federal Reserve Board, Consumer & Community Context – March 2025: Small Business Credit: How Entrepreneurs Finance the American Dream, historical context based on 2023 SBCS results.
- SBA program pages: 7(a) loans, 504 loans, and Microloans.
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
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