Rise in new businesses and spending fuels rebound in demand for SME finance
Australia’s small businesses are increasingly using finance to grow rather than to stay afloat, according to new figures from non-bank lender OnDeck Australia.
OnDeck reported a 42% year-on-year rise in loan applications in the December quarter of 2025. Within this, 34% of applicants sought funds for business expansion, up from 23% a year earlier, signalling a move away from short-term cash flow support despite higher rates and cost pressures.
Western Australia recorded the strongest lift in overall applications, with volumes about double those of the prior year. South Australia showed the most pronounced change in purpose, with the share of expansion-related applications rising from 15.5% to 37.2%. All states saw growth in borrowing for expansion.
“We’re seeing a clear shift from defensive borrowing to investment-led demand,” said Cameron Poolman (pictured right), chief executive of OnDeck Australia. “That’s a meaningful change in sentiment after a prolonged period of caution.
“Many emerging businesses are seeking working capital to get through the major trading periods, while more established businesses are investing to grow; particularly while incentives like the $20,000 Instant Asset Write-Off remain in place through to June 30, 2026.”
Household demand is also supporting SME finance needs. Seasonally adjusted Australian Bureau of Statistics data shows household spending rose 6.3% in November on an annual basis.
“As confidence returns to households, it flows directly through to small businesses,” Poolman said. “That’s translating into higher demand for finance to fund expansion, manage cash flow and seize new opportunities
“We see particularly strong demand from trades, retail and hospitality sectors, which are among the most exposed to consumer spending and seasonal trading cycles. These businesses often don’t have time to wait weeks for funding, which is part of the reason they seek out non-bank lenders.”
The rise in SME borrowing is also occurring alongside growth in new enterprises. More than 1.3 million new Australian Business Numbers were registered in 2025, according to the Lawpath New Business Index, an increase of more than 39% over the year.
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