Chart of the Month - November 2025

Since 2021, non-banks' share of SME (small and medium enterprise) loans has doubled (see chart below). In this article, we look at what is driving this growth and how SMEs are faring in the current economic environment.

Source: Banjo Loans (2025), ‘Banjo SME Compass 2025’

Increasing market share in smaller loans

Looking at the market share of loans to non-banks’ market by loan size reveals that ‌much of the growth has been through smaller loans (see chart below).

Source: Harvey, N., Lai, S., and Spiller, J. (2025), ‘Small Business Economic and Financial Conditions’ in RBA Bulletin, October 2025.

However, total lending to SMEs (banks and non-banks) shows that larger loans to SMEs are growing faster than smaller loans to SMEs (see chart below). This appears to be driven by an increase in loans for property (see second chart below). 

Source: ibid

Source: ibid

It seems SMEs are turning to non-banks for smaller loans to help with items such as the purchase of equipment or funds to expand operations, but are still going to the banks for larger loans, namely for property.

When asked about the challenges in getting finance, SMEs cite strict requirements, processing time, collateral requirements, and navigating the application process among the largest challenges (see chart below). Maybe that explains why they prefer the customer-friendly non-banks for smaller loans, but will grin and bear the bureaucracy of the banks for larger loans. 

Source: ibid

What industries are going to non-banks

Industries that need large amounts of working capital for stock and input materials are more likely to go to non-banks, for example construction and manufacturing (see chart below). This may also explain why SME loans from non-banks are smaller. Namely, loans to help cover ebbs in working capital are typically much smaller than loans for property. 

How are SMEs are thinking about the Australian economy right now

SMEs are feeling more confident recently given the RBA’s three rate cuts since February and strong consumer spending (see the second panel in the chart below). Sentiment around business conditions is more positive but just ticked back down into slightly pessimistic territory.

Source: ibid

Profit margins remain high and are moving up (see chart below).

Source: ibid

The National Australia Bank’s Q2 SME Business Insights report found that cash flow was the largest concern of SMEs at 44% of respondents. This would suggest that SMEs will again look at non-banks for smaller loans to smooth out their cash needs in the short term.

And what will SMEs be using their loans for? Banjo Loans found that over the next year, 40% of SMEs are planning to use funding to purchase equipment or assets. While 33% will seek funding to expand operations, and 29% to develop new products and services.

Final thoughts

Non-bank lenders have carved out an important niche with Australian SMEs over the last 15 years. Despite the uncertainty surrounding inflation and trade, SMEs will once again turn to non-banks for their immediate funding needs over the next 12 months. Demand will increase as the Australian economy improves, and the RBA looks to cut rates further.