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The latest Business Barometer research released by non-bank lender Banjo Loans has found a spike of 43 per cent in the value of business loan applications from small- to medium-sized enterprises (SMEs) during the first quarter of the 2025 financial year.
The number of applications also surged 45 per cent quarter on quarter, which highlighted an “appetite for funding on longer repayment terms”, according to the lender.
The country’s larger SMEs (businesses with a turnover of more than $20 million) increased their borrowing by 50 per cent over 1Q25, while businesses earning between $10 and $20 million increased borrowing by 73 per cent.
However, the number of applications submitted actually dropped 8 per cent on the same period last year, suggesting an underlying weakness in the market along with highlighting challenges for retailers, wholesalers, manufacturers, and construction sector SMEs.
Commenting on the data, CEO of Banjo Loans, Guy Callaghan attributed the surge in applications to Banjo’s recent product improvement.
“Two months ago, we extended the loan tenor for our Business Loan solutions from 36 months to 60 months,” Callaghan said.
“The spike in applications this past quarter demonstrates that small-business owners like the idea of more manageable repayment sums being spread over a longer period.”
With the increase in loan applications also came a rise in declined applications, with 35 per cent of applications being knocked back over the quarter.
When compared to the same period in the previous financial year, the number of declined applications jumped to 118 per cent. According to Banjo, the leading reason for declined applications was the inability to service new loans, as well as failure to meet minimum eligibility criteria.
“Many SMEs are still experiencing financial hardship, and while borrowing trends are shifting, SMEs in QLD, WA and the Northern Territory are bucking that trend, with fewer loan applications submitted,” Callaghan said.
“It’s also important to note that many SMEs are still in recovery mode following the significant year-on-year decline in total loan value we reported on for the final quarter of 2024.
“The latest data reveals that SME businesses in Victoria, South Australia and New South Wales are borrowing more, while in certain sectors – particularly accommodation and food, IT and media, administration services and healthcare – we’ve seen significant resilience and borrowing growth.”
The report also highlighted careful debt management among the SME market, with the lender seeing 30-day plus arrear levels dropping by 2 per cent during this quarter, continuing a downward trend that has been established over the year.
Retailers have reduced their debt levels by 21 per cent over the quarter, while manufacturers have seen loan arrears deteriorate by 26 per cent over this same period.
However, arrears worsened among wholesalers by 38 per cent after getting repayments well under control at the close of FY24.
Callaghan further said that although some industries are facing headwinds, there are still pockets of the services sector that have been thriving, with SMEs providing gas, energy, and waste services significantly increasing loan submissions.
“This suggests that while the overall economic picture may be subdued, there are areas of strength that could be harnessed for growth,” he said.
The report concluded that while economic climates remain challenging, the lift in applications has pointed towards a readiness among some small businesses to adapt and seek new financing solutions.
“To fully capitalise on these positive signs, a proactive approach, including potential interest rate cuts, could provide the necessary boost to invigorate the SME sector,” Callaghan said.
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