iscover 
OnDeck recorded a 42 per cent year-on-year increase in loan applications in the December quarter of 2025. Of those applications, 34 per cent were from businesses seeking funding to support expansion, rather than to manage immediate cash flow pressures.
The lender said the shift indicates a growing number of small and medium-sized enterprises (SME) are looking past day-to-day financial management and toward longer-term investment, despite ongoing cost pressures and elevated interest rates.
On Tuesday (3 February), the Reserve Bank of Australia announced a 0.25 percentage point increase to the official cash rate after the December quarter inflation came in higher than expected.
OnDeck CEO Cameron Poolman said the results point to a clear change in borrowing behaviour among small businesses.
“We’re seeing a transition from defensive borrowing toward investment-driven demand, which signals a meaningful improvement in sentiment after an extended period of caution,” Poolman said.
All states recorded growth in expansion-related loan applications, with the strongest increase in Western Australia, where applications doubled compared with the same period last year.
South Australia saw the largest shift toward growth-focused funding, with the proportion of expansion-related applications rising 140 per cent year on year to 37.2 per cent of total applications.
Victoria recorded a 77.2 per cent increase, while NSW was up 51.2 per cent over the same period.
Poolman said the increase in applications reflected a mix of seasonal working capital requirements and a growing appetite for longer-term investment.
“Many newer businesses are seeking working capital to navigate peak trading periods, while more established operators are investing to grow, particularly while incentives such as the $20,000 instant asset write-off remain available through to 30 June 2026,” he said.
Household spending lifts demand for finance
Improving consumer activity has also supported SME demand. Seasonally adjusted data from the Australian Bureau of Statistics shows household spending rose 6.3 per cent year on year in November 2025.
“As household confidence improves, the benefits flow through directly to small businesses. That’s driving increased demand for finance to fund expansion, manage cash flow and capitalise on new opportunities,” Poolman said.
Demand has been strongest among businesses in the trades, retail, and hospitality sectors, which are closely tied to consumer spending and seasonal trading patterns. Poolman said many of these businesses turn to non-bank lenders because they require faster access to funding.
Business formation has also continued to rise. More than 1.3 million Australian business numbers were registered in 2025, according to the Lawpath New Business Index, representing an increase of more than 39 per cent compared with 2024.
A mixed picture
Other surveys point to a more subdued outlook. Data from non-bank lender Banjo Loans showed borrowing activity among small businesses softening toward the end of the calendar year, as ongoing uncertainty around inflation and interest rates weighed on decision making.
Additionally, research undertaken in December by non-bank lender Prospa and researchers YouGov found that shrinking cash reserves and declining revenue were putting small businesses under pressure.
These conditions may be prompting some businesses to delay major investment decisions, according to a separate national survey by CreditorWatch. However, the same survey found that 82 per cent of businesses still plan to invest over the next 12 months.
[Related: Over one-third of SME customers used a broker in the last 12 months]