ISCOVER
Borrowing by SMEs rose by almost one-third over the June quarter.
Small- to medium-sized enterprise (SME) borrowing rose in the June quarter to reach its highest level in the 2025 financial year, according to Banjo Loans.
The non-bank lender’s Banjo Barometer Data showed that there was a 32 percent increase in SME borrowing compared to the March quarter.
The research also found that SME loans approved by Banjo increased by 22 per cent in the quarter.
The increase was attributed to resilience across several SME sectors, with accommodation and food services rebounding and reporting increased borrowing for the first time in FY25, up 28 per cent quarter over quarter.
Other sectors that performed well included healthcare and social assistance (up 53 per cent); financial and insurance services (up 83 per cent); transport, postal, and warehousing (up 38 per cent); and wholesale trade, which also saw its first uptick this financial year, with a 72 per cent increase in borrowing from the March quarter.
Diverging state borrowing trends
Despite the 32 per cent increase in SME borrowing nationally for the March quarter, the trend was not consistent across all states.
Gains were strongest in NSW, where SME borrowing for Q4 jumped 122 per cent to the highest level in two years.
The increase marked a significant shift, after the state reported a 45 per cent decline in SME borrowing for Q3.
Alongside NSW, Queensland (up 43 per cent), Western Australia (up 58 per cent), and the ACT, which recorded its first uptick in SME borrowing this financial year, led the charge for SMEs.
However, the research also highlighted the divide in state performance, with four of the nation’s eight states and territories showing decreased borrowing among SMEs.
In South Australia, SME borrowing fell 45 per cent on Q3, while in Victoria, it dropped 17 per cent from Q3 and 57 per cent from the state’s SME borrowing high in Q2.
However, a 19 per cent increase in loan applications for the quarter in Victoria signalled a return to “more typical levels of borrowing” by SMEs, Banjo said.
Tasmania and the Northern Territory also recorded decreases in SME borrowing in Q4.
Arrears on the rise
There was an increase in arrears among SME businesses, with 6 per cent more SMEs posting arrears across the board in Q4.
The major impact on arrears was from businesses in arts and recreation services, which reached their highest level.
The Banjo Barometer Data flagged that SMEs with annual revenues under $2 million remained particularly cautious about borrowing, with many businesses still burdened by Australian Taxation Office (ATO) debts and rising operational costs.
Despite cost pressures, Banjo Loans CEO Guy Callaghan said that SMEs were “hanging tough”.
“They are a resilient and optimistic group,” he added.
However, he also noted that there was still a sense of caution among SMEs.
“SMEs have faced an incredibly challenging environment, with little targeted support from either federal or state budgets,” he said.
“Despite this, we’re seeing green shoots of recovery and optimism particularly in sectors like hospitality, retail and finance. Falling interest rates allow SMEs to look at debt funding options, reduce their debt and even increase profits to cover off on debt, so we do hope to see more of this.
“On a positive note, it’s been great to see some SME businesses bouncing back, with the hospitality, retail and finance industries showing some positive signs of growth.
“In saying that, it’s still early days, so while this is good news, we need to take a longer-term view and hope that growth can continue into the future.”
Recent National Australia Bank (NAB) research found that SMEs are increasingly turning to commercial brokers to help them navigate challenges such as trade uncertainty, cash flow pressure, and succession planning.
Separate data from ScotPac showed that SMEs have been reassessing their staffing approaches in response to cost pressures, with almost half (45 per cent) indicating plans to boost their use of contractors.
[Related: Brokers crucial as SMEs face tough decisions: NAB]
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