SmallBusinessLoansAustralia offers prospective borrowers a glimpse of previously unpublished statistics into the Australian SME lending market. We analyse 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 Australian lending statistics provided by Become business loans.  Then there is the most recent data published by the RBA on total small business lending in Australia, covering March 2022 – February 2023.

The idea behind the first piece of research is to unearth the characteristics of the small businesses of Australia which have successfully 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. 

After these unique insights, we delve into the latest data from publicly available sources. This includes information on business lending volumes by the Reserve Bank of Australia. We hope you would find both angles of these SME financing statistics interesting and insightful.

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

Data from Become Lending:

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 making application for a business loan 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

Australian Small Business Lending Statistics

These lending statistics from the RBA paint a picture of the overall lending volumes to the demographic we focus on here at SBLA – small businesses. Through these insights we can gain an idea on the proportion of loans that require residential security and the current preference of lenders to issue fixed or variable rate business loans.

Data from RBA:

Data from RBA:

Visualised:

Overall, we can see that the total amount of outstanding debt held by SMEs has slightly increased over the last twelve months. In March 2022, the total amount of outstanding debt was $137,946 million. As of February 2023, this increased to $142,069 million. So despite Australia’s cash rate rising from a historic low of 0.1% to a sizable 3.35% in this same period, it would appear the economic backdrop has necessitated businesses to borrow more. As of June 2023, Australia’s cash rate is now at 4.1%. 

The total value of business loans that are residentially secured has also increased from $67,470 million to $70,592 million, meaning that the proportion of business loans to be residentially secured has also slightly increased (48.9% in March 2022 vs 49.7% in Feb 2023). This is perhaps not surprising. Lenders will be acutely aware that the sharp rise in interest rates, coupled with higher inflation, will be placing a strain on many SMEs and their respective customers. 

Variable rate business loans appear the preferred choice of 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. SMEs will want to carefully consider if now is a good time to agree to a fixed rate loan. The RBA, who were widely expected to hold the cash rate at 3.6% in their May announcement, unexpectedly hiked the cash rate to 3.85% and then increased this by a further 25 basis points in June – the 12th time they’ve raised rates in just over a year, bringing the cash rate to its highest level in 11 years. One has to consider if and how much further the cash rate will increase and when it will start to fall – being locked into a fixed rate business loan for a long term could prove an unnecessary and extortionate expense if rates do indeed drop.

More Small Business Data on SmallBusinessLoansAustralia

In a series of recent studies, we have gained a comprehensive understanding of the current state and challenges of Small and Medium Enterprises (SMEs) in Australia.

Our Interest Rates & Inflation 2024 study revealed that a majority of businesses are concerned about the impact of rising interest rates and inflation on their operations. A significant 45% are considering taking a loan to manage the effects of high inflation.

Despite these challenges, the Australian SMEs 2023 report showed that SMEs remain optimistic about the future, with 60% expecting their business to grow in the next year. However, issues such as late customer payments and rising costs due to inflation are significant concerns.

These concerns were further highlighted in the Loan to Cope with High Inflation Survey, where it was found that businesses are worried about the rising cost of goods and services due to inflation.

The Late Customer Payments research found that late payments are a significant issue for SMEs, impacting cash flow and overall business operations.

Furthermore, the Areas of Overspending study revealed that a majority of SMEs are overspending in areas such as insurance, utilities, and payroll. By identifying and avoiding unnecessary spending, businesses could potentially save a significant amount of money.

The Australian Small Business & Family Enterprise Report provided an overview of the SME sector, highlighting its significant contribution to the Australian economy. Despite the challenges faced, including rising interest rates and inflation, SMEs continue to play a vital role in the country’s economic landscape.

In conclusion, while SMEs in Australia face several challenges, they remain resilient and optimistic about the future. By addressing issues such as high inflation, late customer payments, and overspending, SMEs can continue to thrive and contribute significantly to the Australian economy.