The last 12 months have been hard for Australia’s small and medium-sized enterprises (SMEs), which have been facing one of the toughest financial climates in recent memory. While small business remains the bedrock of the Australian economy – accounting for over 97 per cent of all businesses and employing nearly half of the workforce – there are myriad challenges facing this dominant part of the market.
SMEs are now contending with a confluence of economic pressures that have threatened their resilience. This financial year, SMEs have been contending with the highest interest rates for 12 years, inflationary pressures, tightened lender appetite, vanishing tax incentives, large ATO debts (the Tax Office is currently chasing around $53 billion), and rising operational costs.
All of this has been compounded recently by global market volatility driven by fresh US tariff uncertainty. Together, these headwinds are forming a perfect storm for small businesses. But brokers can be key in helping these businesses not only keep the lights on but also grow into the future.
SME sentiment still low
Regardless of who you ask, it’s clear that business conditions and sentiment are low. For example, the Monthly Business Survey undertaken by major bank National Australia Bank (NAB) revealed that business conditions remained below average in the March quarter 2025.
Business confidence fell to -3 index points (down 1 point) over the first quarter of the calendar year, with declines in finance, property & business services, manufacturing, wholesale, and construction. Business conditions were broadly flat – at +4 index points – but despite an uptick in profitability in the month, this was mostly offset by slightly lower trading conditions and employment.
How has SME finance been impacted?
The reduction in sentiment has resulted in reduced appetite for borrowing. According to Banjo Loans’ latest Banjo Barometer, for example, SME loan applications and borrowing volumes continue to decline in the face of economic uncertainty. The survey found that both SME loan applications and borrowing volumes hit their lowest point of the financial year so far in the March quarter, when there was a 17 per cent decline in SME borrowing.
SMEs with annual revenues under $2 million remain particularly cautious about borrowing. On an industry basis, the biggest drop in borrowing power for the third quarter of the financial year was from those in education and training, with applications down 57 per cent from the December quarter, according to Banjo. The healthcare sector also suffered from lower confidence in the March quarter, with SME borrowings from this cohort down by 40 per cent, as did SMEs in food services (down 26 per cent).
Uncertainty about the future of the federal government’s instant asset write-off (see page 38 for more) has also reduced asset finance appetite – stalling innovation and operational improvement at a time when cost efficiency is paramount.
How can brokers help?
Despite the increasingly challenging environment, brokers are in prime position to offer much-needed credit advice and lifelines to small businesses. Brokers have access to a growing suite of alternative finance products, from cash flow lending (see page 28) to commercial mortgages (see page 22) and asset finance (see page 34). Finance brokers are also increasingly seen as trusted advisers, strategic partners, and vital educators in a complex and rapidly changing economic landscape.
The tools and technology available to help brokers find the right solution for their SME clients, and fast, have also grown in the past year. Several lenders have turned on digital origination for brokers for the first time – with many now partnering with commercial lending platform CitoPlus to streamline and accelerate the lodgement process – making it easier for brokers to write commercial finance.
By helping SMEs access lower interest rates, flexible funding, working with their accountants to prepare for tax rule changes, and improve their financial resilience, brokers have an outsized role to play in safeguarding the future of Australia’s small business economy.
Brokers are becoming the prime relationship conduit for lenders and are the trusted adviser to their customers
– George Obeid, chief third-party officer, Judo Bank
By staying abreast of what SMEs are focused on and paying attention to local business trends, brokers may also help identify more business. Western Australia’s recent mining boom has led to a large uptick in equipment finance, for example, while Queensland’s preparations for the 2032 Olympics are expected to see strong demand for business finance.
Speaking to The Adviser’s In Focus podcast earlier this year, George Obeid, chief third-party officer at SME lender Judo Bank, said: “Brokers are becoming the prime relationship conduit for lenders and are the trusted adviser to their customers. They have the ability to diversify their income stream by offering a range of services: business advisory, insurance broking, home lending and equipment finance. And I think by providing that exceptional service and diverse service, brokers can really build stronger relationships with clients and secure that repeat business … It’s really about just getting your arms around them and providing full, holistic solutions for them.”
By staying informed, adaptable, and connected to local and national trends, brokers are best placed to solve the finance formula that will keep Australia’s SMEs thriving through 2025 and beyond.
