Australian small and medium-sized enterprises (SMEs) are experiencing a significant shift in borrowing behaviour, with a notable increase in loan applications aimed at business expansion.
This trend emerges as the impending Payday Super reforms pose potential challenges to cash flow management.
Recent data from OnDeck Australia indicates a 42% year-on-year rise in SME loan applications during the December quarter of 2025. This surge reflects a transition from survival-focused borrowing to investment-driven financing. Notably, 34% of these applications were intended for business expansion, up from 23% in the previous year. Equipment purchases and inventory stocking also featured prominently as reasons for seeking finance.
Geographically, Western Australia led the growth, with loan applications doubling compared to the previous year. Queensland and New South Wales followed, recording increases of 54% and 48%, respectively. South Australia exhibited the most significant shift in intent, with expansion-related loan applications rising from 15.5% to 37.2% year-on-year.
OnDeck CEO Cameron Poolman highlighted this change, stating that the data shows a material change in small business behaviour, with a clear shift from defensive borrowing to investment-led demand. This is a meaningful change in sentiment after a prolonged period of caution.
However, this positive momentum faces potential disruption with the upcoming Payday Super reforms, set to take effect on 1 July 2026. Under the new regulations, employers will be required to pay the 12% superannuation guarantee concurrently with wages, rather than on a quarterly basis. This change is expected to impact SME cash flows significantly.
Bill Baker, CEO of SaaS platform Lend, warns that this will materially change how lenders assess SME cash flow and serviceability. Under the quarterly system, unpaid super effectively sat inside the business as a short-term liquidity buffer. That meant bank statements often showed higher average balances, stronger month-end positions, and more headroom in offset and redraw accounts. Lenders use all these inputs in their serviceability and risk models. Once super is paid alongside wages, that buffer disappears.
Modelling by Lend suggests that for a typical SME, a 1% cash flow hit can absorb between 9% and 18% of surplus cash. Depending on the lender's model, that can translate into a 7–15% reduction in borrowing capacity.
In light of these impending changes, brokers are advised to reassess SME cash flow under Payday Super assumptions to help clients understand their post-reform borrowing position. This involves adopting lender-style serviceability tools, predictive modelling, and educating SME clients that Payday Super is not just a payroll change but a borrowing issue.
As SMEs continue to seek financing for growth, understanding and preparing for the implications of the Payday Super reforms will be crucial in maintaining financial health and achieving long-term business objectives.
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