Ten trends reshaping how small businesses access capital in 2026 — from continued bank pullback and the rise of non-bank funders, to the spread of state-level commercial finance disclosure laws and the AI-driven underwriting shift. A field report from a broker working directly with 50+ funder partners and thousands of small business owners.
What's Inside
- 01Bank pullback continues
- 02Non-bank funders take share
- 03State CFDL spread accelerates
- 04Pre-qual without credit impact
- 05AI in underwriting goes mainstream
- 06SBA loan demand stays strong
- 07MCA market matures and self-regulates
- 08Embedded finance reshapes distribution
- 09Industry concentration intensifies
- 10The broker channel grows
The headline: Small business owners in 2026 have more funding options than ever, but the path to capital looks nothing like it did even five years ago. Traditional banks are slower and pickier. Non-bank funders dominate small-ticket deals. State regulators are catching up to the alternative finance industry that grew up around bank pullback. And technology — particularly AI-driven underwriting and embedded finance — is rewriting how, and through whom, capital flows.
This report is our field view from inside the broker channel. We work with the right funders and process applications from small business owners in all 50 states. The trends below are what we are seeing, what we expect for the rest of 2026, and what small business owners should know to navigate it.
Bank pullback continues — small banks remain the most volatile category
The structural pullback in small business funding from traditional banks that began after the 2008 financial crisis continued through 2025 and into 2026. The Federal Reserve's Small Business Credit Survey has tracked this trend for over a decade — and the pattern is consistent: the share of small business loan applications that get fully approved at large banks has stayed in the low-to-mid 50% range, while small/community banks have shown more volatility (high 60s in good years, low 50s in tight years).
What changed in 2024–2025: regional bank failures and consolidation reduced the number of small community banks, which historically were the most generous source of small-ticket commercial funding. The net effect for small business owners is that the local "relationship banker" model is less reliable than it was a decade ago.
If a local bank has been your go-to for working capital, build a backup channel before you need it. A broker relationship gives you parallel access to the right funders without committing.
Non-bank funders now dominate small-ticket commercial finance
For loans and advances under $250,000, non-bank funders have become the primary capital source for U.S. small businesses. This includes online term-loan platforms (OnDeck, Funding Circle, Bluevine), revenue-based financing companies (Pipe, Capchase for SaaS, Wayflyer for e-commerce), and the merchant cash advance industry.
The reason is simple: bank underwriting is built around fixed-format documentation (audited financials, tax returns, formal projections) that small business owners frequently can't produce — not because the business is unhealthy, but because they don't have a CFO. Non-bank funders built underwriting models around bank statement data, payment processor data, and accounting platform integrations, which most small businesses can provide instantly. That data-availability advantage is structural and isn't reversing.
"Non-bank" doesn't mean "predatory" or "expensive." It means the capital source isn't a depository institution. Many non-bank funders offer rates comparable to or better than community bank rates for similar risk profiles.
State commercial finance disclosure laws are spreading — 9 states in force, more proposed
Starting with California's SB 1235 (effective late 2022), eleven states now require commercial finance providers to disclose APR, total dollar cost, payment amounts, and prepayment terms in a standardized format. The current cohort: California, New York, Virginia, Utah, Georgia, Connecticut, Florida, Missouri, Kansas, Texas, and Louisiana. Several more states have proposed legislation in the pipeline, including Illinois, New Jersey, and Maryland.
The result: small business owners in these states get TILA-style transparency on offers that historically were opaque. Comparing a $50K MCA to a $50K term loan is now meaningfully easier in those jurisdictions.
See our full state-by-state commercial finance disclosure guide for the details on each state's law.
If you operate in one of the eleven CFDL states, every offer should arrive with a standardized disclosure. If a provider can't produce one, that's a meaningful red flag — either they're non-compliant or they're not licensed to offer financing in your state.
Pre-qualifying without affecting your credit has become table stakes
Five years ago, getting pre-qualified for small business funding routinely required a formal credit approval and a multi-page application. In 2026, pre-qualification that has no impact on your credit to check, on a 2–5 minute application, is the industry norm. The shift was driven by competition from fintech-native funders who built those flows from day one, plus growing borrower awareness of credit impact.
For small business owners, the practical implication is that you should never let a formal approval happen until you've already chosen which funder's offer to accept. A broker shopping the right funders should be able to do it all on a single quick application and only trigger the formal approval on the final, chosen funder.
See our definitive guide to how funding approval works for the mechanics.
If a broker or funder insists on a formal approval "to see what you qualify for," they're either using outdated tech or trying to gate-keep your file. The market has moved on.
AI-driven underwriting moves from experiment to default
By 2026, most major non-bank funders have integrated AI/ML models into core underwriting workflows. The dominant use cases are bank statement classification (identifying revenue, expenses, NSFs, and gambling/risky deposits), cash-flow forecasting, and fraud detection. Some funders are experimenting with LLM-driven "explain-the-decline" features that give borrowers plain-language reasons for an underwriting outcome.
For brokers, AI has shortened turn time from days to hours on many deal types. For borrowers, it means faster decisions but also more standardized risk assessment — which can be a downside for unusual business models that don't fit the model's training data.
If your business has an atypical revenue profile (project-based, highly seasonal, or pre-revenue with strong order book), an experienced human broker can still get a deal funded that an AI-only decisioning system would auto-decline. The broker channel hasn't been disrupted out of relevance — it's been augmented.
SBA loan demand remains strong despite higher rates
Despite a higher-rate environment, SBA 7(a) and 504 loan demand has stayed strong through 2025 and into 2026. The SBA's annual volume continues to exceed $30 billion in 7(a) approvals, with the typical small business borrower using the loan for real estate, business acquisition, working capital, or equipment.
The reason demand stays robust: SBA loans remain the cheapest long-term capital available to most small businesses. Even at higher Prime rates, the 10–25 year amortization and partial government guarantee make SBA the right answer for any borrower who can wait 30–90 days for closing.
If you qualify for SBA and don't need the money tomorrow, it's almost always the right starting point. Use bridge financing (MCA or short-term loan) to handle the gap if necessary.
The MCA market matures, self-regulates, and weeds out bad actors
The merchant cash advance industry of 2026 looks materially different from the industry of 2018. New York's 2019 reforms on confessions of judgment (COJs) modernized MCA collection practices. State CFDL laws have brought transparency to pricing. Industry associations have published voluntary "best practices" frameworks. And major funders have walked away from stacking, double-dipping, and other practices that gave the early industry a reputational problem.
Bad actors still exist — particularly at the broker/ISO level — but the trajectory is clearly toward professionalization. A well-priced MCA from a reputable funder, used for the right reason and properly understood, is now a legitimate working capital tool for businesses that don't qualify for bank or SBA financing.
If you're considering an MCA, three questions filter out 95% of bad actors: (1) Is your funder licensed/registered in my state? (2) Will you provide the CFDL disclosure if applicable? (3) What's your early payoff discount schedule? Anyone who hesitates on these isn't worth working with.
Embedded finance is reshaping how small businesses encounter capital offers
By 2026, small business owners increasingly first encounter funding options inside tools they already use — Shopify Capital inside Shopify, Square Capital inside Square POS, QuickBooks Capital inside QuickBooks, Stripe Capital inside Stripe, Amazon Funding inside Seller Central. These "embedded" offers are pre-underwritten using the platform's own data and often come pre-approved.
The convenience is real, but so is the trade-off: embedded offers are single-source — you see one platform's offer at one price. Brokers (and the borrower's own due diligence) remain valuable precisely because they introduce competition.
Always treat an embedded offer as the floor, not the ceiling. Shop it against 2–3 other sources before accepting. The convenience premium can be significant.
Industry concentration intensifies — the top funders are gaining share
Within the non-bank small business funding space, the top 10–15 funders by volume have continued to gain market share through 2025 and 2026. Smaller MCA funders and short-term funders have either consolidated, exited, or been acquired. The result is a market where a handful of well-capitalized direct funders set pricing benchmarks for everyone else.
For borrowers, the implication is mixed. Concentration tends to standardize pricing — bad for the borrower hoping to find an outlier deal, good for the borrower who wants market-rate transparency. The broker channel partially offsets concentration by giving each borrower access to multiple top-tier funders simultaneously.
The right broker today gives you access to most of the top-tier funders in one application. The wrong broker has a captive relationship with two or three funders and won't tell you who they shopped your file to. Always ask.
The broker channel grows — because it's the cheapest competition mechanism
Counterintuitively, the broker/ISO channel has grown its share of small business funding origination through the bank pullback and rise of embedded finance. The reason: in a market with many direct funders, embedded offers, and varied state-by-state compliance regimes, the broker is the cheapest mechanism for a small business owner to introduce competition into their search.
A broker doesn't charge the borrower (in legitimate brokerages — always confirm). The broker is paid by the funder on close. For the funder, paying a broker commission is cheaper than the customer acquisition cost of marketing directly to that borrower. For the borrower, the broker is a free comparison-shopping service that turns a single application into real offers you qualify for.
The right way to use a broker is as a competitive intelligence service. The wrong way is to assume the broker is making the funding decision for you — they're not. Their job is to bring you offers; your job (with their guidance) is to choose.
What underwriting data matters most for U.S. small business lending in 2026?
Three inputs decide most small business funding outcomes in 2026: bank statement cash flow, time in business, and platform data from payment processors or accounting software. Personal credit still matters, but it has moved from gatekeeper to one factor among several. Deposit consistency now carries more weight with most non-bank funders than any single credit-report number.
What an underwriter actually reads in three months of bank statements is narrower than most owners expect: average daily balance, how many deposits arrive in a typical month, how many days the account went negative, the count of insufficient-funds items, and any existing daily or weekly debits from other funders. A business with modest revenue and clean, regular deposits routinely reads better than a higher-revenue business with lumpy income and a handful of negative days.
This is also the practical difference between data-driven and traditional underwriting. Bank underwriting is document-led — tax returns, prepared financials, formal projections, reviewed over weeks. Data-driven underwriting is transaction-led: it reads the account activity directly and scores the pattern, which is why decisions come back in hours. The trade-off is less room for context, so an unusual or seasonal revenue profile can score worse than it deserves. Our guide to how business funding underwriting works and the detail on what funders look for in your bank statements go through both in full.
How does data-driven small business lending differ from traditional underwriting?
Traditional underwriting reads prepared documents — tax returns, financial statements, projections — and asks whether a business can demonstrate it will repay. Data-driven underwriting reads transaction history directly from bank and payment-processor feeds and asks whether the cash flow already visible in the account supports the payment. The first takes weeks; the second takes hours.
The clearest way to see the difference is to look at what each model treats as evidence. A bank file is built backwards from a completed fiscal year: filed returns, a balance sheet, a debt schedule, often a personal financial statement, and increasingly a projection for the year ahead. A cash-flow file is built forwards from the last three to six months of account activity: average daily balance, number of deposits in a typical month, negative days, insufficient-funds items, and any daily or weekly debits already leaving the account for other funders. Neither model is reading a better version of the business. They are reading different time horizons, which is why the same file can be declined in one channel and approved in the other on the same afternoon.
Security is the other split, and it is the one owners tend to discover late. In the Federal Reserve Banks’ 2025 Small Business Credit Survey, 59% of firms carrying debt had secured it with a personal guarantee and 51% with business assets. That is the traditional model working as designed: a documented lender takes documented recourse. Cash-flow products frequently ask for less collateral up front and take their security from the revenue stream instead, through a fixed daily or weekly debit or a percentage of card settlements. Less paperwork at the front end is not the same as less obligation — it is a different obligation, priced differently, and it is worth reading the offer for exactly that before signing.
In practice the two models have been converging rather than competing. Cash-flow underwriting started at non-bank funders because that is where the speed pressure was, and the same techniques have since worked their way into bank and credit-union programs for smaller requests, where pulling a full document package costs more than the loan earns. For an owner, the useful takeaway is not which camp a funder belongs to but which file you can actually produce today: if your bookkeeping is current and your returns are filed, the document channel is open to you and generally cheaper; if it is not, the transaction channel will still read your account. Our guide to how funding underwriting works walks through both decisions step by step, and what funders look for in your bank statements covers the transaction side line by line.
Why are U.S. small businesses turning to non-bank financing in 2026?
Largely because that is where the applications now go. The share of small business applicants seeking financing from online fintech lenders rose from 17% in the 2020 Small Business Credit Survey to 29% in the 2025 survey. The draw is speed and paperwork: non-bank underwriting runs on data owners already have rather than on prepared financial statements.
The same survey is blunt about the trade-off, and it is worth stating plainly. 60% of firms that borrowed from online lenders said their actual borrowing costs were higher than expected, against 37% at small banks and 32% at large banks. Applicants at small banks were also the most likely to be fully approved, at 57%. Faster and easier to qualify for does not mean cheaper.
That gap is the entire argument for comparing offers rather than accepting the first one. The Broker Shop is a broker, not a lender — one application goes to the funders in our network of 50+ whose guidelines your business meets, so the offers compete against each other instead of arriving one at a time. It is free to apply, and checking your options won't affect your credit score.
What do small business funding requirements look like in 2026?
Most non-bank funders start from four baseline checks: at least six months in business, a business bank account showing consistent monthly deposits, revenue that comfortably covers the proposed payment, and no unresolved defaults or open bankruptcy. Requirements vary by funder and by product, and clearing the baseline is not the same as an approval.
Above that baseline, what changes is which product you fit rather than whether you qualify at all. Term loans and lines of credit look hardest at credit profile and time in business. Revenue-based products and merchant cash advances weight deposit volume and consistency far more heavily, which is why they remain reachable for owners whose credit is weak — see how to get business funding with bad credit. Equipment and invoice products lean on the asset or the invoice instead of the operating business.
One requirement that is easy to overlook: how much you ask for relative to what you take in. Requesting an amount that no realistic reading of your deposits could service is one of the most common reasons an otherwise fundable file gets declined. How much funding you should actually take covers how to size the request before you submit it.
What funding sources are available for business expansion in 2026?
Expansion is normally funded by one of five sources: an SBA 7(a) or 504 loan for acquisitions, build-outs and real estate; equipment finance for machinery and vehicles; a business line of credit for inventory and staged spend; revenue-based financing or a merchant cash advance for fast, short-horizon growth; and invoice factoring when the growth is already booked but unpaid.
Expansion is also a minority of why owners borrow, which is worth knowing before you assume every funder is set up for it. In the Federal Reserve Banks’ 2025 Small Business Credit Survey, 46% of applicants sought financing to pursue an expansion or a new opportunity, against 56% who sought it simply to meet operating expenses. The products built for the second group — fast, short, priced for speed — are the ones an owner meets first online, and they are frequently the wrong shape for a five-year growth project.
Matching the term to the payback period is what keeps that from going wrong. A machine that pays for itself over four years belongs on four-year money, not on a nine-month advance; inventory that turns in sixty days is exactly what a line of credit is for. Where the growth is a signed contract or a delivered order, invoice factoring converts the receivable you have already earned instead of adding new debt against it. Compare the full range in our guide to small business funding options, and if the expansion is an acquisition or property, start with how SBA loans compare to faster products.
One practical note on timing. Underwriting reads your last three to six months of deposits, so the strongest moment to arrange expansion capital is while those months still look like your good ones — not after you have spent down the balance getting the project started. Applying early costs nothing: it is free to apply, and checking your options won’t affect your credit score.
What’s the latest small business lending news going into 2026?
Three developments matter to owners this year. Federal small business lending data collection now turns on what funders originate during 2026 and 2027, tariff-driven cost increases have become one of the most commonly reported financial challenges, and small business owners’ own revenue expectations have fallen to their lowest level since the 2020 survey.
The regulatory one is the least visible and the furthest along. Under 12 CFR 1002.114(b), a covered financial institution that originated at least 1,000 covered credit transactions for small businesses in each of calendar years 2026 and 2027 must begin reporting application-level data on January 1, 2028; institutions that cross the threshold later comply no earlier than January 1, 2029. The section was last amended on May 1, 2026. The practical consequence is that the counting has already started — what a lender books this year helps decide whether it reports at all. For owners, the eventual payoff is a public federal dataset on who applies for small business credit and who gets it, which today does not exist. It runs alongside, not instead of, the state disclosure laws covered in our commercial finance disclosure guide, which are what actually change the piece of paper in front of you at signing.
The cost picture is the one owners feel directly. Rising costs of goods, services and wages was the most commonly reported financial challenge in the 2025 survey, and more than four in ten firms reported that tariff-related cost increases were a financial challenge in their own right — 77% reported one or both. The pressure is not spread evenly: tariff cost challenges were most prevalent in retail (69%) and manufacturing (62%). That shapes what borrowing is for. When cost inflation rather than growth is driving the application, the money is covering a gap that recurs every month, and the term of the funding needs to be short enough not to outlive the gap but affordable enough not to widen it.
Sentiment has moved with it. The survey’s revenue expectations index fell six points year over year, from 39 to 33, and the employment expectations index fell three points, from 26 to 23 — both the lowest readings since the 2020 survey. Read that as a sizing instruction rather than a forecast. An owner who expects flat revenue should be underwriting their own request against flat revenue, not against the best quarter in the file, and how much funding you should actually take covers how to run that calculation before an offer is on the table. Comparing several offers matters more in a flat year than a growing one, because there is less margin to absorb a bad structure. The Broker Shop is a broker, not a lender: one application goes to the funders in our network of 50+ whose guidelines your business meets, so the offers arrive together and compete. It is free to apply, and checking your options won’t affect your credit score.
What are the biggest small business financing trends in 2026, in short?
Three changes account for most of what owners actually feel. Bank credit for small-ticket amounts keeps getting harder to reach, non-bank and fintech funders have absorbed that demand, and a growing number of states now legally require funders to disclose the full cost of an offer in writing before it is signed.
The scale underneath those three is easy to miss. 86% of firms use financing on a regular basis and 60% applied for it in the twelve months before the 2025 Small Business Credit Survey — borrowing is ordinary operating behaviour for a small business, not a distress signal. What separates outcomes is not whether an owner can find capital but which offer they end up on: of the firms that applied, 42% received the full amount they sought, 36% received some or most of it, and 22% received none.
The through-line for 2026 is that the number of places to get funded has grown much faster than the number of ways to compare them. Speed is no longer the differentiator it was in 2021 — several funders can now return a decision the same day — so the remaining advantage sits in what an offer costs and how it is structured. That is the shift the ten trends below describe in detail, and it is why the disclosure laws in trend three matter more than they sound.
Frequently Asked Questions
Sources: Federal Reserve Banks — 2026 Report on Employer Firms (findings from the 2025 Small Business Credit Survey) · eCFR — 12 CFR 1002.114, Effective date, compliance date, and special transitional rules (Regulation B, small business lending data)
Methodology & sources
This report draws on three sources: (1) The Federal Reserve Small Business Credit Survey, a longstanding industry benchmark; (2) SBA annual funding program data; and (3) The Broker Shop's internal deal flow across our funder network and small business applicants in all 50 states.
Where stats are directional rather than precise (e.g., approval rates "in the low-to-mid 50% range"), we have chosen to favor accuracy over false precision. Year-over-year changes in published surveys can be misleading without context; readers should treat any single-year stat as one data point within a multi-year trend.
Citation: The Broker Shop, "2026 Small Business Funding Trends Report," May 2026, https://thebrokershopinc.com/2026-small-business-funding-trends.html
Want to reference this report? All content is free to quote with attribution. Email submissions@thebrokershopinc.com for raw data requests or interview availability.
See what you qualify for
One 2-minute application is matched to the funders whose guidelines you meet. It's free, and checking your options won't affect your credit score.
See What I Qualify For →