The SME Lending Market: Australian Lending Statistics

SmallBusinessLoansAustralia offers prospective borrowers a glimpse of previously unpublished statistics into the Australian SME lending market. We analyze the small business lending trends that are the driving factors behind why SMEs seek finance, the average loan amount per loan type and the average loan amount per industry. We hope that business owners can use these SME financing statistics as a rough guide to the type and amount of finance they could be eligible for.

The small business loans statistics are from two sources – firstly there is the most recent data published by the RBA on total small business lending in Australia, covering July 2019 – December 2020. Then there is the Australian lending statistics provided by Become business loans.

The idea behind this second piece of research is to find the characteristics of the small businesses of Australia which have secured financing online, and analyse the reasoning. The data was provided by Become Business Loans for the period of July 15 until October 15, 2017. Though the small business loans statistics from Become are a few years old now, they still provide unique insight into the business lending market and it remains information that is yet to be found elsewhere. We hope you would find both of these SME financing statistics interesting and insightful.

Related: Is Australia doing enough to provide access to capital for SMEs?

Data from Become Lending:

By Online Lenders – Sorted by Popularity and Score

These are the most popular lenders for Australian businesses that have been referred by us (smallbusinessloansaustralia.com) to Become funding marketplace:

#1 Lender in Australia Best Rated on Small Business Loans Australia

Est. 2011

Loans size & Terms

$5,000 to $300,000

Secured and Unsecured Loans

Prospa Business Loans Review
Pros
  • Funding: $5,000 to $300,000
  • Countless industry awards, 6 received in 2020 alone
  • Funding granted within 48h
  • 4.9 / 5 rating on TrustPilot
  • 28,000+ Australian Businesses Funded to date
  • ASX Traded Company
  • Clear Terms, Conditions and Repayments
  • Excellent website and onboarding
Cons
  • Had low approval rate between May-Aug 2020 due to COVID
#2 The Industry Veteran

Est. 2002

Loans size & Terms

$5,000 to $300,000

Unsecured Loans

Capify Business Funding Review
Pros
  • Fewest documents required for sign up
  • Industry veteran for 17 years
  • the FIRST Australian online business lender
  • 99% positive client reviews
  • Multiple banking awards
  • More than $500,000,000 in funding since inception
  • Global brand
Cons
  • Min monthly turnover $10,000
  • Smaller scale than Prospa
  • 3% origination fee
#3 Diverse Solutions for Established Businesses

Est. 2013

Loans size & Terms

$25,000 to $1,000,000

Secured and Unsecured Loans

GetCapital Review
Pros
  • Most bespoke financing solution
  • Term Loans available
  • Line of Credit available
  • Business Overdraft available(with illion Data Solutions)
  • Equipment Financing available
  • Deloitte's 2018 Tech Award
  • No early repayment fees
  • No drawdown fees
  • Low annual fee
Cons
  • Min 9 months in business
  • Min $100,000 annual turnover
#4 Bad Credit Businesses Specialist

Est. 2018

Loans size & Terms

$5,000 to $200,000

Unsecured Financing

Lumi Business Finance Review
Pros
  • Newer Businesses Accepted
  • Bad Credit Borrowers Welcomed
  • 2 Hour Approval
  • 93% Positive Reviews
Cons
  • Potentially higher interest rate
  • Smaller and less experienced lender than our top choices
#5 The Global Mega-Brand

Est. 2015

Loans size & Terms

$5,000 to $250,000

Secured and Unsecured Loans

OnDeck Review
Pros
  • Great reputation in Australia and globally
  • 95% satisfaction from clients in Australia
  • Annual interest rate starts at 9.99%
  • Origination fee of 2.5% (lower than most lenders)
  • Traded in the NYSE
  • Application in 10 minutes
  • One of the best known lenders in the world
Cons
  • Not headquartered in Australia
  • Min $100,000 annual turnover

Read here about why these are the best small business loans in Australia.

Borrowers by State and Territory

The following graph presents the most popular states in which SMEs attain financing online:

 

The online SME lending market is particularly active in NSW and VIC but as expected there is a very high correlation between the population in each state and the number of loans required (and secured). As the graph below demonstrates, there is an almost 100% correlation between population and the number of online loans secured in the period.

 

 When we analysed the data on the average loan amount by state we were surprised to see that the highest average belongs to NT, a federal Australian territory. Other than that, the averages are pretty close from one region to the next.

 

By Age of Business

When we look at the age of SMEs seeking finance through the online business lending market, we are surprised to see only 33% of them are under 3 years. Typically, newer businesses encounter more difficulties in securing finance from the bank. The implications for this could be two fold – it could either drive more small businesses to seek financing from online lenders, or it may give the impression that all lenders are as strict as the bank – and the small business lending statistics appear to confirm the lanter.

It’s worth noting that the best australian business lenders, such as Lumi, Capify and Prospa will accept borrowers providing they’ve been trading for at least six months – a more reasonable set of terms than Aussie banks. Max Funding also has secured lending solutions that are available to Aussie startups and businesses operating for less than six months.

By Industry

The Australian lending statistics supplied by Become suggest that by far the most popular sectors to seek online lending are automotive (including transportation), construction, energy, and above all retail / manufacturing. Together, they account for over 50% of all online lender applications.

The average loan amount varies hugely, depending on the industry. The Import/Distribution sector isn’t among the most popular industries to seek online lending but loans to this sector, are on average, the second highest of any industry – loans are roughly twice as much as a business in the Agriculture or Art business. Retail & manufacturing, which is the most common sector to apply for online loans, also receives the highest loan amount (on average) of any sector. Interestingly, the average loan amount is lowest for computing, though we know that with only 1.77% of all applications coming from this industry, the sample of businesses is smaller and more easily skewed.

Reason for Lending

As expected, the most popular reason to seek a fast online business loan is for working capital purposes. This could include paying salaries or upcoming bills. Online business loans are usually associated with speed so they are often best suited to borrowers seeking short term small business loans in Australia or working capital facilities such as a line of credit or business overdraft. Other popular reasons for seeking finance include expansion, paying off debt and buying stock or equipment. Very few SMEs approach online lenders to borrow money for advertising though it should be said this is certainly possible. Online business loans can be used for any business purpose.

In terms of average loan value, the highest figure is for the purpose of debt consolidation. Online business loans can certainly be used for this purpose, though borrowers may prefer a lender such as GetCapital which provides financing terms up to five years. Online business loans issued for the purpose of buying stock had a similarly high average value, whilst loans issued for cash flow and equipment had some of the lowest. It’s surprising to see equipment financing as one of the lowest average values in the SME financing statistics – if borrowers can secure a loan with a piece of equipment they can usually be eligible to borrow more than if they had been seeking finance on an unsecured basis.

Small business lending statistics are based on clients who have used Become Business Loans (formerly known as Lending Express) to find online lenders in Australia in the periods between July and October 2017. We do not guarantee accuracy in regards to the entire online business lending market in Australia – Become is a new contender and this is not a sufficient sample size to reach statistical certainty. Still, we find this data extremely usable, actionable and hard to come by, hence our reason to keep these SME financing statistics on SBLA despite the research being originally conducted in 2017.

Australian Small Business Lending Statistics

Data from RBA:

TotalResidentially SecuredFixed RateVariable Rate
Month$ million$ million$ million$ million
July, 2019144437730664993694501
August, 2019141447709545033391113
September, 2019143721708815084592876
October, 2019142257700585034991908
November, 2019145454702535337092084
December, 2019144676694375321091465
January, 2020143857693735256891289
February, 2020143939693055242891512
March, 2020143063690825170391360
April, 2020141902686645148890414
May, 2020143382703515145091932
June, 2020145716709305289292824
July, 2020143760701155267591086
August, 2020143184699595258490601
September, 2020142696694685308189614
October, 2020143731691205475588976
November, 2020142074695375313288942
December, 2020142406689965375388653

Visualised:

The SME lending statistics from the RBA paint a picture of the overall business lending market in Australia. We can see that, on a total basis, lending to SMEs actually declined slightly throughout 2020. As the whole globe encountered an economic slowdown, there is a small positive in the sense that capital was still filtering through to SMEs in Australia at a consistent level. Though we also know that as a result of economic shutdowns in Australia, demand for financing by SMEs was at an all-time high, so this also has to point to the reluctance of lenders to extend credit. Given the higher demand, we would have expected lending to SMEs to have increased throughout 2020 – initiatives from the RBA are hoping to bolster SME lending as we move forward (no surprise in knowing that large businesses in Australia saw an increase in lending through 2020).

Roughly 50% of all small business loans are secured by residential property. Surprisingly, the amount of small business loans secured by residential property remained flat throughout 2020. We would have expected this to rise as lenders’ became weary of the implications of COVID-19.

Variable rate business loans appear the preferred choice of lenders/borrowers as they continue to make up roughly two thirds of the small business lending market – meaning roughly one in three small business loans in Australia are issued with fixed interest rates.