Small businesses borrow mainly to keep operating, not to chase growth. In the Federal Reserve's 2025 Small Business Credit Survey, 60 percent of small employer firms applied for financing, and the two leading reasons were covering operating expenses (56 percent) and pursuing an expansion or new opportunity (46 percent).
What do small businesses use funding for most often?
The Federal Reserve's Small Business Credit Survey is the best available answer, because it asks owners directly rather than inferring from loan files. The 2026 report, published in March 2026 from responses collected between September 3 and November 14, 2025, surveyed 6,525 small employer firms with 1 to 499 employees across all 50 states. Of the firms that applied for financing in the prior twelve months, 56 percent did so to meet operating expenses and 46 percent to fund an expansion or pursue a new opportunity. Firms can cite more than one reason, and many do — the same loan often covers payroll this month and a new van next month.
Financing is not an emergency measure for most owners either. 86 percent of small firms use financing on a regular basis, most commonly credit cards and loans. That reframes what borrowing signals: routine use of credit to smooth timing is normal business practice, not a warning sign. What matters is whether the cost and repayment schedule fit what the money is being used for.
How often do owners get the full amount they ask for?
Partial approval is the norm rather than the exception. Among applicants in the survey, 42 percent received the full amount they sought, 36 percent received some or most of it, and 22 percent received none. In other words, nearly four in ten funded businesses had to make a smaller number work.
That has a practical consequence for how you plan. If your project only works at the full amount, build a version that works at 60 percent of it, and know which piece you would fund first. It is also why applying where your profile actually fits matters more than applying widely — approval odds vary a great deal by funder type, not just by borrower.
Where do owners go for capital, and how has that shifted?
The mix has moved steadily toward non-bank sources. 29 percent of applicants applied to an online lender in 2025, up from 17 percent in 2020, while large banks and small banks remain the most common destinations. Approval outcomes differ by channel: small banks approved the full amount for 57 percent of applicants, the strongest full-approval rate among major lender types, while online lenders were more likely to leave borrowers reporting higher costs than expected — 60 percent of online-lender borrowers said so.
Debt levels have also shifted. 31 percent of small firms carried no outstanding debt in 2025, up from 21 percent in 2020, suggesting many owners deliberately deleveraged after the high-rate years. Among firms that did borrow, 59 percent gave a personal guarantee and 51 percent pledged business assets as collateral, so it is worth knowing what you are signing before you sign it.
How to match the use of funds to the right product
The most expensive mistake is a mismatch between the term of the money and the life of what it buys. Short-term working capital and a business line of credit suit recurring timing gaps — payroll before a customer pays, inventory before a season. Assets that earn for years, like a truck or a commercial oven, belong on equipment financing matched roughly to their useful life. Expansion capital sits in between and should be sized to a payback you can actually describe.
The Broker Shop is a funding broker, not a funder: we put more than 50 lenders in competition for your file rather than lending ourselves. One two-minute application reaches the funders whose guidelines you meet, so you can compare cost and structure across every funding option instead of taking the first offer. It is free to apply, and checking your options won't affect your credit score. For the wider market picture, see our 2026 funding statistics.
Frequently Asked Questions
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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 →The bottom line: Most small businesses borrow to cover operating expenses rather than to expand, only 42 percent of applicants get the full amount they ask for, and matching the term of the money to what it buys is what keeps the payment affordable.
Sources: Federal Reserve Banks — 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey · America's SBDC — summary of the 2026 Report on Employer Firms · Fed Small Business — Small Business Credit Survey archive
Found these figures useful? You are welcome to cite or link to this page. Suggested attribution: “What Small Businesses Actually Use Funding For,” The Broker Shop — thebrokershopinc.com/how-small-businesses-use-funding.html. Every figure links to its original primary source.