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The Banjo Barometer for the second quarter of this financial year (2Q26), released by non-bank lender Banjo Loans, showed that after a brief lift in activity during the September quarter (loan volumes rose 14 per cent), SME borrowing eased between October and December, with activity dipping 5 per cent over the quarter.
Produced by non-bank lender Banjo Loans, the Banjo Barometer analyses the lender’s own loan application data to track business confidence, borrowing trends, and economic sentiment.
October recorded a short-term lift in borrowing activity, which Banjo attributed to seasonal factors, such as Black Friday, before demand flattened or declined through November and December.
“After a strong spike in September that flowed into October, talk of rate cuts being a thing of the past led to a very subdued final two months for SME borrowing,” said Banjo Loans CEO Guy Callaghan.
“October saw a brief lift, likely tied to Black Friday activity, before demand flattened or declined through November and December.”
Across sectors, ongoing pressure remained evident in manufacturing, transport, postal and warehousing, and wholesale trade. Manufacturing borrowing fell 38 per cent quarter on quarter, transport, postal, and warehousing declined by 39 per cent, and wholesale trade fell 15 per cent.
Based on historical loan data, Banjo said these industries continued to record lower loan numbers alongside a rise in struggling businesses.
Overall, application volumes eased slightly, dropping 15 per cent from Q1, while demand continued to shift toward larger loan sizes from larger businesses. Business quality and conversion rates remained steady over the period, reflecting a lending environment where lenders are becoming increasingly selective, and lower-quality businesses are aware of these conditions.
NSW and Victoria, the country’s two largest SME markets, remained stable but showed limited growth. These states accounted for a higher proportion of funding requests from larger businesses, while smaller states saw increased activity from smaller operators.
“Application volumes have eased slightly, while demand has continued the trend toward larger loans from larger businesses, and lenders remain selective. NSW and Victoria are stable but subdued, while smaller states are seeing more activity from smaller operators,” said Callaghan.
The data also showed arrears increased among financial services businesses, while transport remained a sector under watch.
Declined applications from poor bank statement conduct continued, reflecting weak cash flow management that raised concerns around ongoing loan serviceability. Australian Tax Office (ATO) debt also remained a key factor impacting approval outcomes.
Callaghan added: “Based on the latest Banjo Barometer data for Q2, we’re seeing more businesses seek funding, receive conditional approval and then pause or reassess their options, including self-funding.
“This underscores the limited confidence SMEs have in the current economic climate, as they navigate an increasingly complex and uncertain financial landscape. In the absence of rate relief, policy support or clearer communication to lift consumer and business confidence, we expect SMEs to remain subdued and extremely cautious in their decision making.”
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