Demand hits record levels as more businesses seek faster approval processes and flexible lending criteria
More than half of Australia’s small- and medium-sized enterprises (SMEs) are now planning to use non-bank lenders to support new investments, according to the latest SME Growth Index Report from ScotPac.
This marks a significant increase from 2014, when only 7% of SMEs considered non-bank options.
The report found that demand for non-bank finance reached a record 55% in the first half of 2025, up 7% from the previous year. SME owners cited faster approval processes, more adaptable lending criteria, and a wider selection of funding products as key reasons for the shift.
Meanwhile, the proportion of SMEs intending to use bank lenders dropped from 42% to 30% over the past year. Of those, 21% plan to stay with their main bank, while 9% are looking at secondary banks.
The trend towards alternative finance comes as small businesses across Australia face mounting financial pressure. A separate SME sentiment report commissioned by Prospa found that 77% of SMEs said they were personally affected by economic uncertainty and inflationary pressure. Thirteen percent of SMEs surveyed reported having no cash reserves, while almost one-third (30%) said they expect to seek external financing within the coming year.
Despite these challenges, ScotPac’s research revealed that 59% of SMEs are preparing to invest in growth over the next six months. The use of private credit is increasing, with one in four businesses planning to use it for about 10% of their investment needs. Nearly all SMEs surveyed — 94% — said they would use their own equity for at least part of their investment, while only 5% were uncertain about their funding approach.
ScotPac chief executive Jon Sutton (pictured) said the changing finance landscape is creating new opportunities for brokers. “SMEs have more choice than ever when it comes to finance solutions, and they’re clearly voting with their feet,” he said. “That scenario is creating more opportunities for brokers who are uniquely placed to add value by identifying the right solution for each SME’s needs.”
Another report from Deloitte showed that commercial and asset finance loans arranged by brokers grew by more than 20% annually.
“As Australia and New Zealand’s largest non-bank SME business lender, ScotPac has built an extensive network of broker partners across more than 35 years of operation,” Sutton said. “We look forward to continuing to grow these relationships in years to come as brokers take a more central role as trusted SME advisors.”
He also advised SMEs to consider external funding options rather than relying solely on their own equity. “It’s understandable that business owners view their own equity as a safe option, but in many cases, working with a lender presents strategic advantages,” he said.
“With the right lending solution in place, SMEs can meet tight funding deadlines while preserving their working capital or savings buffers in case unforeseen costs arise. For example, ScotPac can help SMEs access finance by unlocking the value in their business assets to take advantage of time-critical opportunities like stock purchases or equipment upgrades.”
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