For a lot of small businesses, I think freelancers feel safer because the risk is easier to understand.
With a freelancer, the owner usually thinks: I know who is doing the work, I can talk to them directly, the price is smaller, and if it does not work I can stop quickly. That does not always mean the freelancer is better, it just feels more controllable.
Agencies tend to earn trust when the business has either outgrown one person or needs a process more than a pair of hands. Things like paid media, reporting, creative production, landing pages, email, and strategy all moving together are where a good agency can justify itself.
The trust gap usually comes from vague agency packaging. A small business hears "full-service marketing" and worries they are paying for account managers, meetings, and dashboards instead of actual work. A freelancer sounds more concrete: posts, ads, edits, emails, calls.
If I were selling either one, I would make the first engagement very specific. One channel, one measurable problem, one short timeline, clear deliverables. That lowers the perceived risk more than arguing freelancer versus agency.