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February of this year saw the RBA cut interest rates for the first time in over four years.
Following the announcement, small businesses boosted borrowing activity, taking advantage of reduced rates.
As reported by small business lender OnDeck Australia, the three months after the RBA’s action saw loan activity up 40 per cent from the same period in 2024.
This growth was witnessed across all industries. The most popular of which were:
- Retail trade (49 per cent)
- Professional and tech services (36 per cent)
- Construction (22 per cent)
- Hospitality (14 per cent)
There are a variety of usages for these loans, said OnDeck Australia CEO Cameron Poolman.
“Business owners are using funds for everything from hiring staff and purchasing stock to investing in productivity-enhancing technology,” said Poolman.
OnDeck said that business and consumer confidence are up since the cuts and there is an air of optimism among small-business owners.
“Lower interest rates are a key driver of both consumer and business confidence,” Poolman said.
“We are seeing renewed confidence flow directly into increased business lending over the past quarter. That’s great news for the broader economy – when small businesses feel optimistic, they invest, hire, and grow.”
Despite the invigorated optimism, there are still concerns coming from SME operators.
A major one is the future of interest rate decisions, with 51 per cent of small-business owners highlighting this as a key issue in 2025.
Meanwhile, 61 per cent said rising business costs are top of mind.
These trends were analysed further in Westpac’s Quarterly Business Snapshot.
According to the report, cash flow is on the come up across three-quarters of Australia’s industries and the Business Cashflow Gauge was up 0.4 per cent throughout the quarter, meaning debt servicing was down 1.3 per cent compared to the previous quarter.
While there is optimism after two interest rate drops, the global market is still uneasy due to uncertainty around the US tariffs.
April saw “higher than expected” tariffs, Westpac said, with 2025 GDP growth now at 1.9 per cent, down from 2.2 per cent in February.
“We expect conditions to gradually improve through 2025 and into 2026, but the global environment has become more challenging,” said Westpac’s head of business and industry economics, Sian Fenner.
“Since our last report in February, the US led tariff escalation and volatility following ‘Liberation Day’ have led to a reassessment of risk and trade dynamics.”
Despite this, businesses will benefit from expected rate cuts, wage growth, and subdued inflation.
[Related: Business lending at a crossroads: Can SMEs overcome mounting challenges?]
