Mortgage and finance brokers are facing more cautious SME clients as inflation and rising costs eat into cash buffers and reshape borrowing capacity and appetite for new debt.
Banjo Loans’ latest SME Compass Report finds nearly one in two small and medium‑sized businesses (48%) have lifted prices in the past year just to stay afloat. A further 46% now see inflation as the biggest barrier to growth, up from 39%.
Two‑thirds of SMEs (67%) expect inflation to keep constraining expansion over the next 12 months. At the same time, 43% have cut expenses and 39% are being more selective about customers and revenue streams, signalling a shift to defensive settings just as many are still pursuing growth.
Banjo Loans CEO Guy Callaghan (pictured) said the findings reveal a sector walking a tightrope between opportunity and risk.
“The Compass Report highlights that SMEs are balancing growth ambitions with survival strategies,” Callaghan said. “Inflation is the dominant pressure, while cash flow concerns are intensifying, forcing businesses to prioritise viability over expansion.”
Cash flow strain is already feeding directly into finance decisions.
More than a quarter of SMEs (28%) cite cash flow as a barrier to growth, and 45% have delayed pursuing opportunities in the past year because of these concerns. Half of all businesses surveyed said they would run out of cash within six months if revenue stopped, and only 19% could operate for more than a year without new income.
Against that backdrop, this fragility is driving greater interest rate sensitivity. That sensitivity is already being tested, with the RBA delivering back‑to‑back 25 basis point hikes in February and March to lift the cash rate to 4.1%. The central bank has warned that inflation is likely to remain above target for some time, increasing the risk that borrowing costs stay higher for longer.
According to the Compass Report, 59% of SMEs would change their business settings if rates moved, up from 52%. If mortgage rates or business lending costs rose, 48% say they would act, including refinancing or postponing new borrowing; if rates fell, 55% would adjust, most commonly by paying down debt faster.
The report points to a multi‑speed SME economy that will influence how lenders assess risk on commercial loans and property‑backed facilities.
Retail operators are under the most strain, with 83% naming inflation as a key growth barrier and long‑term confidence in the sector falling to 55%. By contrast, information media and telecommunications businesses report stronger cash stability and higher confidence.
Nationally, 83% of SMEs say at least one concern keeps them awake at night, most commonly inflation, cash flow, and staffing.
“Across Australia, SMEs continue to grow and hit revenue targets, but cash reserves remain tight and uncertainty is high,” Callaghan said. “The Compass data shows that SMEs are resilient but cautious and need to carefully manage finances as they navigate business in 2026.”
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