Small-business owners are becoming increasingly satisfied with online lenders largely because they will often make loans that most banks won’t.

That was a key takeaway from an annual survey of small-business credit trends released Tuesday by the 12 Federal Reserve banks.

While small-business borrowers are generally more satisfied with banks — their rates are substantially lower — the survey found that the gap is narrowing.

Specifically, 35% of the business owners who received loans from online lenders said that they were satisfied with their borrowing experience, up from 19% in the 2016 survey. By contrast, 75% of business owners said that they were satisfied with their borrowing experience from small banks, up from 74% two years ago, while 49% said that they had a good experience with large banks, up from 47%.

The results suggest that more and more small businesses are relying on fintechs for funding, particularly if they have spotty credit records. Overall, online lenders approved 75% of the loan requests received, compared to 68% for small banks — defined as those with less than $10 billion of deposits — 56% at large banks and 53% at credit unions.

But Krista Morgan, the founder and CEO of the online lender P2Binvestor, said that even some borrowers who could qualify for bank or credit union loans are turning to fintechs for the speed with which they can fund loans.

“What’s happening is that business owners are starting to value the time and the experience. Our rate might be double what it is at a bank, but the time it’s going to take you to apply for that loan, go through underwriting and then manage it on a day to day basis is going to be a lot faster,” she said.

Indeed, the survey found that among firms that applied to online lenders over banks or credit unions, 70% said that speed was a determining factor.

Some borrowers, of course, have few options: 47% said that they turned to online lenders because they did not have sufficient collateral to qualify for a loan from a bank or credit union. Many of those borrowers, too, are frustrated with the rates online lenders charge, as evidenced by the 52% of respondents who said that they were dissatisfied with online lenders.

Small businesses also stood a better chance of getting funded by a community development financial institution. In all, CDFIs approved 88% of loan requests, the survey found.

Overall, fewer firms applied for financing last year than in 2016, the report’s authors said, but half of those firms said that that was because they already had sufficient financing.

A larger share of firms that applied for financing also received the full amount they requested, with 46% saying that they received full funding versus 40% a year earlier. That’s very likely because firms that are medium to high credit risks have increasingly gravitated to fintech lenders, where they stand a better chance of getting approved.

“When we look at where self-reported medium- and high-risk firms are most successful in getting financing, they’re most successful at online lenders,” said Claire Kramer Mills, assistant vice president at the New York Fed. “The percentages are notably higher than at small banks or large banks, which tend to be the troika of where firms are seeking capital.”

Broadly, the survey results suggests that business conditions are improving for the nation’s small businesses, defined here as those that have between 1 and 499 employees. Small-business owners said that they were more optimistic than they had been over the past two years, and they were anticipating greater revenues and profitability.

Those small businesses that faced the most difficulty in getting financing were generally younger or brought in less revenue. Seventy percent of firms under $100,000 in annual revenues and 61% of those less than five years of age said that they had experienced a shortage in financing.

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