SmallBusinessLoansAustralia offers prospective borrowers a glimpse of previously unpublished statistics into the Australian SME lending market.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:

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

Data from RBA:

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 and the SME loan recovery scheme.

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.