The Federal Reserve Banks released the 2026 Report on Employer Firms on March 3, 2026. It is the main annual report from the Small Business Credit Survey (SBCS), and it is built on the 2025 survey: 6,525 responses from firms with 1 to 499 employees in all 50 states and Washington, D.C., collected between September 3 and November 14, 2025.
Every figure below comes from that report or from the Federal Reserve Board's Senior Loan Officer Opinion Survey, with the source linked. One caveat applies throughout: the Fed notes that the SBCS is a convenience sample, not a random one, so the results describe the firms that answered rather than every small business in the country.
The headline numbers
| Measure (2025 survey) | Result |
|---|---|
| Firms that use financing regularly | 86% |
| Firms that applied for financing in the prior 12 months | 60% |
| Applied to cover operating expenses | 56% of applicants |
| Applied to expand or pursue a new opportunity | 46% of applicants |
| Received the full amount sought | 42% of applicants |
| Received some or most of the amount | 36% of applicants |
| Received nothing | 22% of applicants |
| Firms with no outstanding debt | 31%, up from 21% in 2020 |
Source: Federal Reserve Banks, 2026 Report on Employer Firms.
Outcomes barely moved from the previous year. In the 2025 Report on Employer Firms, which covered the 2024 survey, 41% of applicants received all of the financing they sought, 36% received some and 24% received none. The Fed describes the full approval share as steady year over year but still below prepandemic levels.
Among firms that did not apply, most said they already had enough financing.
Where firms applied, and who approved them
38% of firms applied for a loan, line of credit or merchant cash advance in the 2025 survey, nearly unchanged from the year before. Large banks were the lender most often sought, followed by online lenders and small banks.
Online lenders keep gaining share. The portion of applicants who sought financing from online fintech lenders rose from 17% in the 2020 survey to 29% in 2025.
Small banks fully approved 57% of their applicants, the highest share of any lender type in the report and up from 54% in the 2024 survey. The report's chart of outcomes by source compares small banks with large banks, online lenders, finance companies, credit unions and community development financial institutions, and small banks lead all of them.
Approval also varies a great deal by product. These are the full approval rates for selected products in the 2025 survey:
| Product | Fully approved | Partially approved | Denied |
|---|---|---|---|
| Auto or equipment loan | 71% | 17% | 11% |
| Merchant cash advance | 48% | 40% | 12% |
| Business line of credit | 45% | 31% | 24% |
| SBA loan or line of credit | 37% | 35% | 28% |
| Business loan | 35% | 35% | 30% |
Source: Federal Reserve Banks, 2026 Report on Employer Firms, chart of outcomes by product (PDF, page 19). Rows may not add to 100% because of rounding.
The pattern makes sense. Equipment loans are secured by the equipment, which lowers the lender's risk. Merchant cash advances are underwritten mostly on sales deposits and approve easily, but they are among the most expensive forms of financing; our MCA vs term loan comparison shows how the cost works out.
Why applicants were turned down
Among applicants that were not approved for at least some of what they sought, the reasons given were:
| Reason for denial | Share citing it |
|---|---|
| Lender requirements too strict | 46% |
| Too much debt already | 37% |
| Low credit score | 30% |
| Insufficient collateral | 29% |
| Weak sales | 29% |
| Lenders do not approve financing for businesses like mine | 29% |
Source: Federal Reserve Banks, 2026 Report on Employer Firms (PDF, page 15).
Existing debt remains a major obstacle even though it eased slightly. In the 2024 survey, 41% of firms denied all or some financing cited too much debt, up from 22% in 2021, according to the 2025 report. In the 2025 survey the figure was 37%.
If debt is your issue, lenders will look hardest at how much of your cash flow is already committed to payments. Our guide to the debt service coverage ratio shows how to calculate it before you apply.
Online lenders: faster, but more cost surprises
Online lenders approve quickly and serve firms that banks turn away, but their borrowers were the least satisfied in the survey.
| Lender type | Borrowers saying costs were higher than expected |
|---|---|
| Online lenders | 60% (4% said lower) |
| Small banks | 37% |
| Large banks | 32% |
Satisfaction followed the same order. Among applicants approved for at least some financing, the share satisfied with their lender was:
| Lender type | Satisfied | Dissatisfied |
|---|---|---|
| Credit union | 76% | 3% |
| Small bank | 65% | 6% |
| Large bank | 64% | 8% |
| Finance company | 57% | 12% |
| Online lender | 35% | 15% |
Source: Federal Reserve Banks, 2026 Report on Employer Firms (PDF, page 24).
Online lender applicants reported more problems with their lender than other applicants, and high interest rates and unfavorable repayment terms were the most common complaints. The practical lesson is to ask for the total dollar cost and the full payment schedule before you sign, not just the rate or factor. Our comparison of online lenders and banks walks through the trade-off.
Debt, guarantees and collateral
Among firms carrying debt, 59% relied on a personal guarantee to secure it and 51% pledged business assets. For most small business owners, business borrowing is still tied to personal finances.
Costs, tariffs and the outlook
Performance held steady while expectations fell. Revenue and employment growth were stable between the 2024 and 2025 surveys, though firms were slightly more likely to report revenue decreases than increases.
- The revenue expectations index fell from 39 to 33, and the employment expectations index fell from 26 to 23. Both are the lowest since the 2020 survey.
- Reaching customers and growing sales was the most common operational challenge, followed by hiring or retaining qualified staff.
- Rising costs of goods, services or wages was the most common financial challenge. More than 4 in 10 firms cited tariff-related costs, and 77% cited one or both.
- Tariff-related cost challenges were most common in retail (69%) and manufacturing (62%).
The 2025 survey also asked about international trade. 48% of firms sourced at least some inputs from outside the United States in 2024, and 14% sourced more than half of their inputs abroad. Most of those firms saw input prices rise. Their responses:
- 76% passed at least some of the increase on to customers
- 60% absorbed at least some of it
- 13% switched to domestic suppliers and 8% switched to different foreign suppliers
- 3% moved production to the United States
About 1 in 5 firms had international customers in 2024, and 40% of those expected international sales to fall in 2025, compared with 16% expecting an increase.
How small firms are using AI
46% of firms said they currently use artificial intelligence, 15% plan to start within 12 months and about one-third have no plans. About half of users are still experimenting, 44% have partly built AI into their business processes and 7% have fully integrated it.
The most common uses were writing or marketing (83% of users), individual productivity (61%) and planning or analysis (51%). Most users reported no change in labor costs, while 71% reported higher productivity, 39% better quality and 31% higher sales. Accuracy (46%) and adapting tools to the business (43%) were the top challenges for current users.
What banks say: the Senior Loan Officer survey
The SBCS is the borrower's view. The Federal Reserve Board's Senior Loan Officer Opinion Survey (SLOOS) is the lender's.
In the January 2026 SLOOS, covering the fourth quarter of 2025, modest net shares of banks reported tightening standards on commercial and industrial (C&I) loans to firms of all sizes, and a modest net share tightened the maximum size of credit lines for small firms. Demand from small firms was basically unchanged. Banks that tightened most often cited a less favorable or more uncertain economic outlook and a lower tolerance for risk. Looking ahead, a moderate net share expected the quality of C&I loans to small firms to deteriorate in 2026.
That survey also asked how banks treat firms exposed to AI. A major net share said they were less likely, compared with the start of 2025, to approve C&I loans to firms adversely affected by AI.
The most recent survey shows conditions for small firms still tightening. In the October 2026 SLOOS, published November 2, 2026 and covering the third quarter, banks reported tighter standards on C&I loans to small firms (annual sales under $50 million) while standards for large and middle-market firms were basically unchanged. Banks also tightened collateral requirements and interest rate floors for small firms, and reported weaker demand for C&I loans from firms of all sizes.
What this means if you are applying
Apply where approval odds are best for your profile. Small banks had the highest full approval rate in the survey. If you have a relationship with a community bank, start there. If you want to see several lender types at once, you can see what you qualify for on Loanistry.
Fix the debt picture first. "Too much debt" was the second most common denial reason. Paying down or consolidating expensive balances before you apply, and showing your coverage ratio, addresses it directly.
Price every offer in dollars. With 60% of online lender borrowers reporting higher costs than they expected, ask each lender for the amount you receive, the total you repay and the payment schedule.
Expect more paperwork at banks. With small firm standards, collateral requirements and rate floors all tightening in the latest SLOOS, have tax returns, financial statements and a short use-of-funds explanation ready before you apply.
Account for costs and tariffs in your story. If rising input costs are squeezing margins, lenders will see it in your statements. Explain what you are doing about it.
When your file is ready, you can compare your funding options with Loanistry.
Sources
- Federal Reserve Banks: 2026 Report on Employer Firms, Findings from the 2025 Small Business Credit Survey, checked November 2026
- Federal Reserve Banks: 2026 Report on Employer Firms (PDF), checked November 2026
- Federal Reserve Banks: 2025 Report on Employer Firms, Findings from the 2024 Small Business Credit Survey, checked November 2026
- Federal Reserve Board: Senior Loan Officer Opinion Survey, January 2026, checked November 2026
- Federal Reserve Board: Senior Loan Officer Opinion Survey, October 2026, checked November 2026