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Recent sentiment indicators suggest confidence among businesses has weakened amid global uncertainty, rising costs, and the prospect of further interest rate increases. Yet despite the subdued outlook, brokers and lenders are still seeing steady credit demand from SMEs.
Speaking on the podcast Finance Specialist, hosts Liam Garman and Trent Carter said that the trend reflects strategic decision making rather than panic borrowing, as businesses look to strengthen their financial position ahead of a potentially tighter economic environment.
“Pleasingly, I’m not seeing a lot of panic in the market. I think the whole of the Australian economy, no matter where you sit, whether you’re a business owner, consumer or broker, is expecting this,” Carter said.
“SMEs feel like they’re getting squeezed from all sides. They’ve got higher costs, higher input costs. So that does drive a lack of confidence, but I don’t think that means a lack of intent.”
Strategic borrowing, not panic
A range of cost pressures are weighing on Australian businesses. Higher energy prices, rising rents, and increased borrowing costs are all contributing to a more cautious operating environment. New regulatory policies, such as Payday Super reforms, are also tightening already thin cash flows. At the same time, geopolitical tensions and broader economic uncertainty have added another layer of unpredictability to the outlook.
Rather than stepping away from credit entirely, Carter said that many SMEs are taking a more strategic approach. Some businesses are refinancing existing loans, restructuring debt, or securing additional liquidity to create financial buffers for the months ahead.
“I don’t think this is panic borrowing. I think it’s strategic readiness,” Carter said.
“I don’t think credit demand equals desperation in the market. I think you’re seeing a lot of people getting ahead of the curve. Refinance and restructuring are definitely growth enablers in these times, and not all credit conversations need to be about acquisition.”
These moves are less about reacting to immediate stress and more about preparation. With the possibility of further interest rate rises and tighter operating conditions, many businesses are reassessing their balance sheets and funding structures earlier than they might have in previous cycles.
“Credit can be about getting your ducks in a row, making sure that things are tidied up, making sure that you’ve got the best deal out there, making sure that you’ve extended your loan term to reduce the cash flow impact for businesses. Let’s not forget we’ve got things coming on the horizon like changes to super payments – that’s going to impact businesses’ cash flow,” Carter said.
“The effective operators are moving into that space of saying, yeah, I’m going to need to increase my limits here. I need to support my cash flow, I need a little bit of a war chest. So let’s start looking at those things.”
A proactive role for brokers
For brokers, Carter said that the trend highlights the importance of early conversations with SME clients about funding strategy, cash flow, and long-term resilience.
Instead of waiting for businesses to reach a point of financial pressure, brokers are increasingly encouraging clients to review their current facilities, assess potential risks, and explore refinancing or restructuring options, while market conditions remain manageable.
“Good brokers will be on the forefront of these conversations with their clients, rather than reacting to it,” Carter said.
“I think the brokers that just wait for the market to demand action and don’t have these productive conversations, they’re the ones that are going to be struggling more. It’s going to be more of a push than a pull.
“So I would say pull your clients along the journey, make sure they’re prepared, make sure you’re having the conversations around their budgets, their cash flow, what’s impacting their business and potentially where the solutions in your toolbox can help them out.”
Refinancing existing facilities, extending loan terms, and increasing credit limits are among the tools Carter said were being used to help businesses manage cash flow and maintain operational flexibility during uncertain periods.
He added: “I think we need to encourage good early conversations with our SME clients out there to say, hey, look, while we’re moving into maybe a tighter economy, what are the controlables that you’ve got in your business to get ahead of, to make sure that you remain competitive and productive.
“It’s a cyclical thing – economies do have cycles. We just need to make sure we’re having early conversations with our SMEs because they are definitely feeling the pressure.”
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