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In its latest industry report, the Australian Banking Association (ABA) found that while SMEs were benefiting from more favourable lending conditions thanks to stronger competition, they were also borrowing at record levels.
ABA CEO Simon Birmingham said stronger competition was delivering better outcomes for SMEs in Australia, which the report found generated $1 trillion in gross added value in 2024–25.
“This is competition working exactly the way it should, giving owners more choice about who they bank with and more finance to reinvest into their business,” Birmingham said.
“Australia’s 2.7 million small and medium businesses are absolutely critical to the economy and banks are providing them with the support they need to operate, to grow and employ more Australians.”
Business lending growing
According to the report, 40 per cent of SMEs had sought finance from their bank, while the amount of credit provided by banks reached a record $750 billion in April 2026, up from $567 billion in April 2023.
Indeed, according to the Australian Prudential Regulation Authority’s (APRA) Monthly Authorised Deposit-taking Institution Statistics, business lending hit a six-year high of $1.26 trillion in June, with $20 billion added during the month.
In their quarterly and annual reports, major banks have also recorded growth in their business lending books.
The Commonwealth Bank of Australia’s (CBA) business lending book increased by 13 per cent over the 12 months to June 2026, from $159 billion to $180 billion; Australia and New Zealand Banking Group (ANZ) reported a 4 per cent rise in business and private bank loans over the June quarter to $71 billion, while National Australia Bank saw business lending increase by 2 per cent over the same period.
Judo Bank, which caters specifically to SMEs, reported an 18 per cent increase in its lending book to $14.7 billion for the 2026 financial year, up from $12.5 billion in June 2025 and $6.1 billion in June 2022.
“We are seeing record amounts of lending to small businesses with $750 billion in outstanding credit, providing an important injection of financing for working capital, new plant and machinery or opportunities for expansion,” Birmingham said.
Pressure remains
The surge in business lending could be indicative of stress rather than growth, however.
Economic stress from higher interest rates and rising costs has impacted businesses’ margins, while ATO debt enforcement and regulatory changes such as Payday Super have eroded cash flow.
Additionally, a recent audit of the Australian Tax Office found that small business debt had increased by $19.4 billion between 2018–19 and 2024–25 – a 118 per cent increase.
In May, fellow credit bureau CreditorWatch found payment arrears had climbed to their highest level since January 2020.
Broker Daily has spoken to both lenders and brokers on how cash flow pressures are influencing businesses’ credit behaviour, with demand for working capital facilities increasing alongside a shift from “defensive borrowing to strategic borrowing”.
According to a report from credit reporting bureau Equifax, the proportion of commercial debt paid between 31 and 60 days late increased to 10 per cent in May, up from 7.4 per cent in March.
Fellow credit bureau CreditorWatch also found that July was the third consecutive month in which payment defaults rose, reaching their highest level since September 2025.
The hospitality sector has been hit particularly hard, with one in eight cafes and restaurants closing in the past year, according to CreditorWatch’s data.
Pressures are also more pronounced in regional areas, with close to three-quarters of regional small businesses reporting falling profits, and brokers saying many owners are now delaying investment and focusing on keeping their businesses afloat.
In the ABA’s report, the main reason for SMEs seeking finance was to maintain short-term cash flow or liquidity, followed by expanding the business.
Birmingham added that despite pressures, banks could provide support to clients beyond finance, such as payment infrastructure and fraud and scam protection.
“It’s this day-to-day financial infrastructure that allows businesses to operate whether it be transaction accounts, online banking, payments services or cash flow tools,” Birmingham said.
“Support isn’t just there for the good times. When the going gets tough, banks have dedicated teams to assist small business customers navigate through harder economic conditions.”
[Related: SME funding realities reshape broker role]
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