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Lower interest rates are fuelling stronger confidence among small businesses, according to OnDeck Australia.
The start of the rate-easing cycle in February 2025 led to a jump in business loans amid stronger small business confidence, according to small business lender OnDeck Australia.
The SME lender said it had seen a 40 per cent year-on-year increase in the value of business loans funded in the three months following the February 2025 rate reduction by the Reserve Bank of Australia.
According to OnDeck, the February rate cut provided relief and helped support business owners to move forward with investment and expansion plans – a trend OnDeck said it expects to continue following the latest 0.25 per cent rate drop in May.
Commenting on the trend, OnDeck Australia CEO Cameron Poolman said: “Lower interest rates are a key driver of both consumer and business confidence.
“We are seeing renewed confidence flow directly into increased business lending over the past quarter. That’s great news for the broader economy – when small businesses feel optimistic, they invest, hire, and grow.
“Across our portfolio, we’re seeing growth across all industries, especially in retail trade with an increase of almost 50 per cent.”
OnDeck also saw growth in professional and tech services (36 per cent), construction (22 per cent), and hospitality (14 per cent).
“Business owners are using funds for everything from hiring staff and purchasing stock to investing in productivity-enhancing technology,” Poolman said.
The jump in business loans comes amid a rise in consumer confidence and growing optimism among small-business owners.
On Friday (23 May), the Westpac Quarterly Business Snapshot Q1 2025 (for the three months to 31 March 2025) also revealed tentative signs of improving cash flows across sectors, with the lender’s Business Cashflow Gauge edging 0.4 per cent higher.
Small business lending looks set to rise, with more than half (55 per cent) of small and medium-sized enterprises (SMEs) planning to borrow in the next year, with a growing number relying on brokers for finance, according to data from SME lender Lumi.
In a recent appearance on The Adviser’s In Focus podcast, Guy Callaghan, CEO of small business lender Banjo Loans, also said SMEs were increasingly looking for solutions beyond pure price increases.
“The one thing we know is that [SMEs] are such a resilient lot,” Callaghan said.
“They’re really positive, and they look for ways in which they can not only survive but grow, prosper, and drive their business to the next level.
“For all that we’ve seen and all the hard work [SMEs] have had to go through, they still [see the world as] a glass three quarters full – which is awesome for the economy.”
You can find out more about the challenges and opportunities for SME finance in the May edition of The Adviser magazine, out now.
[Related: SME cash flows showing signs of improvement: Westpac]
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