Australian small and medium-sized enterprises (SMEs) are demonstrating a notable shift in their financing strategies, moving from survival-focused borrowing to growth-oriented loan applications.
Data from OnDeck Australia indicates a 42% year-on-year increase in loan applications during the December quarter of 2025, with a significant portion of these applications aimed at business expansion.
Specifically, 34% of applicants sought funds for expansion purposes, up from 23% in the previous year. This trend suggests a growing confidence among SMEs in their prospects and a willingness to invest in growth initiatives, despite prevailing economic challenges such as higher interest rates and inflationary pressures.
Geographically, Western Australia experienced the most substantial increase in overall loan applications, with volumes approximately doubling compared to the prior year. South Australia also saw a significant change, with the proportion of expansion-related applications rising from 15.5% to 37.2%. This pattern was observed across all states, indicating a nationwide shift towards growth-focused financing among SMEs.
Cameron Poolman, CEO of OnDeck Australia, highlighted this change in sentiment, noting a clear move from defensive borrowing to investment-led demand. He emphasized that many emerging businesses are seeking working capital to navigate major trading periods, while more established enterprises are investing in growth, particularly taking advantage of incentives like the $20,000 Instant Asset Write-Off available until June 30, 2026.
Household spending patterns are also contributing to this trend. Seasonally adjusted data from the Australian Bureau of Statistics shows a 6.3% increase in household spending in November on an annual basis. This uptick in consumer confidence translates directly to small businesses, leading to higher demand for finance to fund expansion, manage cash flow, and seize new opportunities.
Industries such as trades, retail, and hospitality, which are closely tied to consumer spending and seasonal trading cycles, are experiencing particularly strong demand for financing. These businesses often require quick access to funds and may find traditional bank loan processes too slow, prompting them to turn to non-bank lenders for more expedient solutions.
Additionally, the rise in SME borrowing aligns with an increase in new business formations. Over 1.3 million new Australian Business Numbers were registered in 2025, marking a 39% increase over the year. This surge in new enterprises further underscores the dynamic and evolving nature of the SME sector in Australia.
For SMEs considering expansion, it's essential to carefully evaluate financing options and align them with business objectives. Consulting with financial advisors and exploring various loan products can help identify the most suitable solutions to support growth initiatives effectively.
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