The latest data from SME lender Banjo Loans has provided some insight into how Australia’s SMEs are adapting to an increasingly difficult operating environment.
Non-bank lender Banjo Loans has said Australia’s small and medium-sized businesses have “parked the bus”, with the sector taking a defensive approach to an operating environment characterised by rising costs and weak economic activity.
The comments come from Banjo’s latest SME Business Barometer Report, which provides a quarterly snapshot of the lender’s SME portfolio during the fourth quarter of the financial year ending 30 June 2026 (FY26).
Banjo’s report found a sharp increase in the number of businesses choosing not to proceed with a loan after receiving conditional approval, with Banjo also observing a rise in SMEs switching lenders at the final stage of the application process or deciding not to proceed altogether.
During the quarter, the non-bank also reported shifts in average loan sizes across different SME segments compared with the previous three months.
Businesses with annual turnover of $20 million or more recorded the largest decline, with average loan sizes falling 40 per cent. This was followed by SMEs turning over between $10 million and $20 million, where average loan sizes fell 33 per cent.
The smallest businesses also saw average loan sizes decline by 7 per cent over the quarter.
By contrast, average loan sizes increased for businesses with annual turnover between $500,000 and $2 million (up 15 per cent), $2 million to $5 million (up 11 per cent), and $5 million to $10 million (up 1 per cent).
Banjo said the quality of SME loan applications remained resilient during the June quarter, with conversion rates holding steady.
Among declined applications, serviceability concerns were the most common reason, followed by businesses failing to meet minimum eligibility requirements and adverse credit issues.
The report also highlighted improvements in SME repayment behaviour, with 30-plus day arrears declining significantly year on year across a range of industries.
Financial and insurance services and wholesale trade recorded the largest improvements, with arrears falling 100 per cent compared with the previous year. Manufacturing followed with a 97 per cent reduction, while construction services recorded a 91 per cent decline.
Other sectors also reported notable improvements, including accommodation and food services (down 85 per cent), administrative and support services (down 80 per cent), and transport, postal, and warehousing (down 76 per cent).
Retail trade recorded the smallest decline, with arrears falling 2 per cent year on year.
Banjo said the results reflected the focus SMEs have placed on managing debt obligations and strengthening their financial resilience amid ongoing economic uncertainty.
Headwinds and opportunities
Speaking to The Adviser, Banjo Loans CEO Guy Callaghan said brokers have an important role to play in helping SME clients navigate the current challenging operating environment.
“I think the main thing a broker can do is understand the cash flow, financial position and funding needs of the business,” he said.
“With the final point around funding needs, a broker should clearly stipulate to a lender any restrictions that a business has on drawing down on funds. i.e. if drawing down on a loan is reliant on the business winning a project or a certain project starting.
“In addition, with understanding the cash flow position, they need to also ascertain any tax commitments the business may have. The ATO is still being very strong on outstanding debts.”
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