Australian banks are competing more aggressively for small business customers, driving loan margins to their lowest level in five years, according to a new report from the Australian Banking Association (ABA).
The report, released this week, found that the margin banks charge on small business loans above the cash rate has fallen to a five-year low, a shift the ABA attributes to intensifying competition across the sector.
The underlying data shows average quarterly margins have narrowed by 39 basis points since peaking in late 2022, driven by increased competition between bank and non-bank lenders. For an SMB with a $500,000 loan, that narrowing translates to roughly $1,950 in annual interest savings — equivalent to about two weeks' pay for a minimum wage employee.
Banking support for small business has grown substantially in recent years, with credit outstanding to the sector rising sharply since 2023.
The report also found that 40% of small businesses have sought finance from their bank, while faster processing enabled by new technology has cut approval times for one in four small business borrowers.
NAB's QuickBiz product was cited as an example, offering unsecured digital loans of $5,000 to $250,000 assessed on cash flow rather than security, with approval in 15–20 minutes and funds available within one business day.
ABA CEO Simon Birmingham (pictured) said the findings reflect banks actively vying for small business customers rather than treating pricing as static.
"We are seeing banks compete hard to win small business customers and that is translating into more competitive pricing for those businesses," Birmingham said.
"This is competition working exactly the way it should, giving owners more choice about who they bank with and more finance to reinvest into their business."
Birmingham said the scale of bank lending to small business reflects the sector's broader economic significance.
"Australia's 2.7 million small and medium businesses are absolutely critical to the economy and banks are providing them with the support they need to operate, to grow and employ more Australians," he said.
"We are seeing record amounts of lending to small businesses with $750 billion in outstanding credit, providing an important injection of financing for working capital, new plant and machinery, or opportunities for expansion."
Birmingham added that banking support goes beyond finance alone, pointing to transaction accounts, online banking, payments infrastructure, and fraud protections as part of the broader package available to small business customers.
The report notes that 98% of SMBs hold at least one banking product, and that banks invested $2.5 billion in scam and fraud prevention in the 2025 financial year alone, as 82% of SMBs reported being exposed to a scam in the past year.
"Support isn't just there for the good times. When the going gets tough, banks have dedicated teams to assist small business customers navigate through harder economic conditions," he said.
The report also points to the National Reconstruction Fund Corporation's $1 billion Economic Resilience Program, under which banks are administering zero-interest loans of up to $5 million to eligible businesses with turnover up to $100 million affected by 2026's fuel price and supply chain disruptions.
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