Small business financing isn’t necessarily becoming easier — but financially stronger businesses appear to be getting access to better financing options.
Biz2Credit’s Q2 2026 Quarterly SMB Financing Report shows a significant shift in the types of businesses receiving financing and the products they’re using. Among businesses funded through Biz2Credit, operating margins and debt-service coverage improved from a year earlier, while fewer businesses took on multiple new financings. At the same time, traditional term loans accounted for a much larger share of funded dollars.
The numbers are striking. Term loans represented 40.6% of funded dollar volume in Q2, up from just 11.3% a year earlier. Median deal size increased 33.3%, median operating margins rose from 15% to 18%, and median debt-service coverage improved from 1.45x to 1.58x.
I spoke with Rohit Arora, CEO and co-founder of Biz2Credit, about what the findings mean for entrepreneurs seeking financing today.
Better Financial Health Opens More Doors
Rieva Lesonsky: The report suggests businesses are borrowing more — and choosing longer-term financing. What does that tell you about how owners are feeling today compared to a year ago?
Rohit Arora: The data is behavioral, not sentimental. Businesses with stronger balance sheets and predictable cash flow are accessing term products they weren’t qualifying for a year ago. Capital deployment is more intentional. The businesses breaking through this lending environment are the ones converting revenue into durable margin. That wasn’t universally true 12 months ago.
The shift also reflects infrastructure. When lending is embedded into the platforms businesses already use — payroll, point of sale, accounting — lenders deploy capital faster and underwrite more precisely. That changes the economics for both borrowers and lenders.
Lesonsky: The report supports that distinction. Biz2Credit’s total funded volume increased 9.3% year over year, while deal count rose 5.4%. But the businesses receiving financing were also showing stronger operating margins and debt-service capacity.
Don’t Confuse Lending Volume With Confidence
Lesonsky: What’s the biggest misconception people have when they look at lending data?
Arora: Volume is not sentiment. People read a shift in lending volume as proof of confidence or fear. That’s backward. What matters is composition. A market can grow while becoming more selective. Q2 shows exactly that: total funded volume is up, but the businesses being funded are measurably higher-quality.
The shift toward term loans is not borrowers demanding more leverage. It is borrowers who qualify for better products finally accessing them. That is a misconception about what the data means, not about the data itself.
Lesonsky: That product shift was substantial. Term loans rose from 11.3% to 40.6% of funded dollars year over year, while revenue-based financing declined from 88.6% to 58.9%. Biz2Credit says the two products serve different needs: term loans are better suited to businesses with predictable cash flow that can support fixed repayment schedules, while revenue-based financing can accommodate businesses with more variable cash flow.
Some Industries Have More Credit Capacity
Lesonsky: What industries are showing the greatest confidence right now, and which are still holding back?
Arora: The portfolio data shows clear differentiation. Sectors with stable, recurring revenue and accelerating hiring — professional services, healthcare, logistics — are deploying capital. Sectors with revenue volatility or contracting payrolls are not. Lenders are pricing that distinction into every term sheet.
The confidence question is secondary. What the data measures is credit capacity. Businesses in high-performing sectors are qualifying at higher rates because their fundamentals support it. That is a credit story, not a sentiment story.
A Pattern Is Emerging — But It Isn’t a Long-Term Trend Yet
Lesonsky: Do you think this represents a lasting shift, or are businesses still cautiously testing the waters?
Arora: One quarter of data is a signal. Two quarters is a pattern. Three starts to look like a trend. We are at two.
Whether this becomes structural depends on infrastructure, not sentiment. Term loans require different underwriting, servicing, and risk management than revenue-based financing. If lenders can embed that infrastructure into their platforms and reach more borrowers efficiently, the shift is structural. If it stays concentrated in traditional lending channels, it is cyclical.
We will know more in Q3. The metrics to watch are margin stability, debt-service coverage, and whether stacking behavior continues to decline. SBA policy changes could accelerate the shift to term loans. We are tracking all three.
Before You Borrow, Stress-Test the Numbers
Lesonsky: If you’re a business owner considering financing this year, what factors should you weigh before taking on new debt?
Arora: Know whether you are borrowing to grow or borrowing to survive. Lenders can tell the difference, and the terms reflect it.
The businesses accessing capital successfully in this environment understand their cash flow. They know what repayment schedule they can support. They are realistic about leverage. The data shows fewer businesses stacking multiple financings. That is discipline, not caution.
Before you take on debt: model your cash flow under stress, not just under plan. If the math works at 80% of projected revenue, borrow. If it only works at 100%, wait.
Lesonsky: That may be the most useful lesson in the entire report. The percentage of businesses taking new financing while already carrying recent financing declined from 29.6% to 24.9% year over year. Meanwhile, the typical business in the portfolio wasn’t more leveraged than a year earlier.
Capital Efficiency Matters More Than Optimism
Lesonsky: Are small businesses optimistic enough to invest in themselves again?
Arora: The question assumes optimism is the variable. It is not. Capital efficiency is. Q2 volume growth tells us the businesses accessing capital are deploying it productively. Whether that is optimism or pragmatism is irrelevant.
What matters is that capital is flowing to businesses that can convert it into margin, not just revenue. That is how you know a market is functioning.
My Takeaway
For small business owners, the message isn’t simply that more financing is available. It’s that financial discipline can expand your financing options.
Healthy margins, predictable cash flow, manageable leverage, and the ability to comfortably service debt can affect not only whether you qualify for financing, but what kind of financing you can access.
And Arora’s 80% test is worth remembering: Don’t decide whether you can afford debt based on everything going according to plan. Decide whether you can afford it when things don’t.
Rieva Lesonsky is the founder of Small Business Currents, a content company focusing on small businesses and entrepreneurship. You can find her on Twitter @Rieva, Bluesky @Rieva.bsky.social, and LinkedIn. Or email her at Rieva@SmallBusinessCurrents.com.
Photo courtesy Katelyn Perry for Unsplash+
