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In its latest Banjo Barometer, non-bank business lender Banjo Loans recorded its strongest quarter since it began reporting in 2023, with record demand for applications and funded loans despite a cautious market.
Loan application volumes increased by 27 per cent in September 2026 compared with the previous quarter, while loans drawn rose 31 per cent over the same period.
The number of funded loans also increased by nearly 15 per cent.
Construction remained the largest source of demand, with strong growth also recorded across retail trade, health care and social assistance, and professional services.
Banjo is not alone in seeing business lending demand rise. Banks such as Commonwealth Bank of Australia, Australia New Zealand Banking Group, National Australia Bank (NAB), and Judo Bank have also recorded strong growth in their business lending books, alongside non-bank lenders such as Prospa and Bizcap.
According to credit reporting bureau Equifax, business loan demand increased across all five sectors it tracks, while mortgage demand fell 19.2 per cent year on year in September.
The growth in business lending has also intensified competition. The Australian Banking Association (ABA) recently found that the margin on small business loans above the cash rate had fallen to a five-year low.
SMEs under pressure
Rising demand for business finance comes against a backdrop of mounting pressure on SMEs.
National Australia Bank’s (NAB) Business Survey, which has tracked confidence and conditions for more than 20 years, found that a “triple threat” of higher interest rates, global uncertainty and elevated fuel and diesel costs had pushed business confidence to near-historic lows.
Alongside these economic pressures, Australian Taxation Office debt enforcement and regulatory changes, including Payday Super, have added to cash-flow pressures.
In May, credit bureau CreditorWatch found payment arrears had climbed to their highest level since January 2020.
The strain has also been reflected in personal insolvency figures. Business-related personal insolvencies increased 14.4 per cent in FY2025–26 to 4,046 cases, according to the Australian Financial Security Authority.
Equifax general manager of commercial Brad Walters said the combination of cash-flow pressures was helping drive demand for business finance, rather than dampening it. However, he noted that businesses were pulling back from asset finance.
“On the ground, small and medium businesses are actively taking on working capital loans to cover everyday expenses, rising overheads and tight cash flow,” he said, citing the building sector as an example of the emerging trend.
“Faced with persistent overheads, material costs and trade payment delays, smaller builders are securing cash lines likely to help keep current projects moving and protect immediate balance sheet liquidity, rather than buying new heavy machinery.”
Similarly, Banjo Loans chief executive officer Guy Callaghan said businesses were turning to the lender to maintain flexibility in the face of changing market conditions.
“Despite ongoing pressure from rising costs, regulatory requirements and cautious consumer spending, many business owners are taking a proactive approach to managing their businesses,” he said.
“They're securing access to capital today, so they have flexibility and certainty when opportunities arise or conditions change.”
Brokers have also told Broker Daily of growing interest in business loans and a shift in how they approach the sector as clients’ needs and credit requirements change.
A diversity of needs
Trent Carter, partner at Accendo Financial said that business lending also tended to be more resilient in tougher economic conditions because businesses have a much broader range of funding needs.
"It is not simply about buying an asset. Businesses need finance for cash flow, working capital, equipment, property, acquisitions, tax obligations and restructuring existing debt," he said.
"When economic conditions become more difficult, a lot of those funding requirements actually become more important rather than disappearing.
"We are certainly seeing cash flow become tighter for some businesses, and rising ATO debt is part of that conversation. That creates demand for brokers who can help businesses restructure debt, free up working capital or find more appropriate funding arrangements.
Carter added that the economy didn't move uniformly, with some industries still performing strongly and looking for capital.
"So you effectively have demand coming from both directions: businesses that need finance to manage tougher conditions and businesses that want finance to take advantage of opportunities.
"For brokers, that is what makes business lending particularly interesting at the moment. The conversation isn't always 'How much can I borrow?' It's increasingly 'How can I structure my debt and capital so the business is in the best possible position over the next 12 to 24 months?' That is a much broader conversation."
Lenders adjust to conditions
At the broker level, Rethink Financing managing director Son Pham said that while he’d seen residential loan demand faltering, but commercial remained resilient.
“The interesting thing about business lending is that lenders have a bit more flexibility when it comes to policy because it's not regulated in the same way,” he said.
“Residential lending is regulated, so it's harder for lenders to tweak policies.
“They've introduced different servicing metrics and policies that other banks don't offer. That's grabbing our attention, and we're thinking, right, let's do business there.
“In this environment, the lenders that are going to get more business are the ones that are being innovative and doing something different.”
Credit quality holds firm
Callaghan said one of the most encouraging findings in the latest report was that arrears of more than 30 days remained near historic lows, with several industries reporting “no material arrears”.
“The standout result for us is that arrears remain firmly under control despite many businesses continuing to face economic headwinds,” said Callaghan.
“It suggests SME owners are managing their finances carefully, exercising strong governance and maintaining disciplined cash-flow management.”
Banjo also reported that credit risk scores for loan applicants increased over the quarter, although businesses were taking longer to convert approved facilities into funded loans.
“Many business owners are planning further ahead than they have in the past. We're seeing customers secure approval and then take more time before drawing down funds, often waiting until they genuinely need the capital.
“Equally, we're seeing fewer businesses rush to repay facilities early because maintaining access to cash remains important in the current environment.”
What would further rate hikes do?
With the prospect of further rate hikes firmly on the table, Pham said there would be a limit to how much pressure the business lending market could withstand.
However, he said demand for finance was likely to persist across a range of needs, with strong competition among lenders potentially supporting refinancing activity despite ongoing economic uncertainty.
“Overall, business sentiment is down, but we're seeing a range of reasons for borrowing,” he said.
“We've seen a few deals lately involving businesses paying off ATO debt.
“We're also still doing purchases. There are clients who have money and want to buy. Then you've got the other end of the market, where businesses are doing it tough and looking to refinance.”
Carter also noted that the prevailing conditions produced a divergence of needs for businesses, opening up other avenues for brokers.
"When conditions are difficult, the conversation tends to shift towards refinancing, restructuring, improving cash flow, consolidating expensive debt and protecting the underlying business. When confidence returns, it moves towards expansion, acquisitions, equipment and property investment. The opportunity doesn't necessarily disappear, it changes.
"That's why I don't think a deteriorating economic environment automatically means less opportunity for business finance brokers. In many cases, complexity creates a greater need for better support. A business with several facilities, an ATO liability, pressure on working capital and higher interest costs needs someone to look at the whole funding structure, not simply find another loan."
However, Pham warned that further rate rises could eventually weigh on demand, particularly for new purchases.
“I think residential lending is going to be flat or dead at the moment, but we haven't seen that flow into the commercial space.
“If rates keep going up and up, there will be a ceiling where everything starts to fall apart. There could be a recession, and then rates will come right back down.
“I think new business would probably start to taper off in terms of purchases, but paying out debts or refinancing is still going to happen. Businesses still need to do those things.”
[Related: How Payday Super could trigger ‘structural shift’ in SME lending]
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