The Federal Reserve runs the largest survey of how small businesses actually finance themselves, and its 2025 results, published in 2026, are unusually direct about online lenders. The share of financing applicants who sought money from an online or fintech lender rose from 17% in 2020 to 29% in 2025. Over that same period, credit union and bank applicants reported more satisfaction with their lender than online lender and finance company applicants did, and applicants at small banks were more likely to be fully approved than applicants at any other lender type. Businesses are going to online lenders more, not because the data shows better odds or better experiences there, but for reasons the survey does not fully explain, most plausibly speed and a lighter application. Our own FY2025 data shows a median 7(a) rate of 10.25%, a fraction of what an online lender discloses charging.
How many businesses are actually shopping this decision
About 38% of small employer firms applied for a loan, line of credit, or cash advance in the prior 12 months, per the 2025 Small Business Credit Survey, essentially unchanged from the year before. Among those applicants, large banks remained the single most common place to apply, followed by online lenders and then small banks, which means most businesses comparing SBA against an online lender are also implicitly comparing both against a bank in the same search. That context matters: the choice is rarely SBA-or-nothing versus an online lender, it is usually three or four options evaluated at once, with speed and cost pulling in opposite directions.
What the Fed’s survey actually found
Two findings from the 2025 Small Business Credit Survey matter most for this comparison. First, “high interest rates” and “unfavorable repayment terms” were the most common challenges reported by online lender applicants, the top complaint categories for that lender type. Second, small banks, not online lenders, posted the highest full-approval rate among lender types surveyed. That combination cuts against a common assumption, that online lenders are worth their cost because they approve more small businesses. The survey’s own data does not support that trade as a blanket rule.
What an online lender actually charges
Disclosed, lender-specific numbers back up the survey’s findings on cost. OnDeck, one of the larger online small-business lenders, publishes its own average APR: 56.4% on term loans and 56.6% on lines of credit, based on loans it originated in the first half of 2025. NerdWallet’s July 2026 market survey puts the broader online term-loan range at 14% to 99% APR, reflecting that pricing varies significantly by lender and borrower profile, but rarely approaches SBA-level rates.
What an SBA loan costs and takes instead
Set against those figures, SBA’s FY2025 median 7(a) rate of 10.25%, capped under SBA rules and disclosed upfront, is the other half of the trade. Rate caps currently run from prime plus 6.5 points on loans of $50,000 or less down to prime plus 3.0 points above $350,000, with prime at 6.75% as of the site’s latest FRED pull, so a borrower can bound the worst case before applying anywhere. See current SBA loan rates for the full tier breakdown, and how to apply for an SBA loan for what the underwriting timeline actually involves. The honest cost of that lower rate is time and documentation, not a smaller loan or worse terms.
The growth trend probably outruns the data behind it
Online-lender applications climbing from 17% to 29% of the applicant pool over five years, while net satisfaction with online lenders fell and small banks kept the best full-approval rate, is not a contradiction so much as a sign that awareness and marketing reach have outpaced the actual borrower experience. An online lender’s application is easier to find and faster to fill out than a bank’s, which drives the volume, independent of whether it is the better financial decision for a given borrower. Worth checking your own assumption against the data before assuming an online lender is your best or only shot.
Speed is the one place online lenders clearly win
Nothing in the Fed’s data disputes that online lenders fund faster. A same-day or next-day decision is the entire product, and for a business with a genuine, near-term cash need, that speed has real value, priced into the cost. The question this data raises is whether that speed is worth the online-lender premium for financing you have the time to plan for, a real estate purchase, an acquisition, equipment, or general growth capital, where SBA’s weeks-long process is a better trade than a fintech lender’s rate. Lighter documentation is the other genuine advantage: an online application often skips the tax-return and business-plan depth an SBA package requires, which matters most for a thin-file or very new business that would struggle to assemble a full SBA application on short notice regardless of rate.
Where each one fits
If speed is genuinely the binding constraint, an online lender is a real option, understood at its real cost. If you have even a few weeks, check basic SBA eligibility with the eligibility checker before assuming an online lender is your only path, since the Fed’s own data shows banks approving more often, not less, than the online-lender applicants often assume. Get a shortlist of SBA lenders that actually fund businesses like yours, built on funded-loan track records rather than who pays for placement, through get matched.