Australia’s small business funding landscape is shifting fast, with fresh data showing SMEs are borrowing to grow again – just as looming Payday Super reforms threaten to cut borrowing power by up to 15%.
Online small business lender OnDeck Australia reports that loan applications jumped 42% year-on-year in the December quarter 2025, signalling a clear shift in sentiment from survival to expansion.
OnDeck CEO Cameron Poolman (pictured left) said the data shows a material change in small business behaviour.
“We’re seeing a clear shift from defensive borrowing to investment-led demand. That’s a meaningful change in sentiment after a prolonged period of caution,” Poolman said.
Expansion is now the top reason for seeking finance. In the December quarter 2025, 34% of small businesses cited expansion as the planned use of funds, up from 23% in 2024. Equipment purchases, and inventory and stock, were the next most common purposes.
The upswing isn’t evenly spread. Western Australia recorded the fastest application growth, with loan applications doubling compared with a year earlier, while Queensland (+54%) and New South Wales (+48%) also saw strong gains. South Australia delivered the most dramatic shift in intent, with the share of expansion-related loan applications rising from 15.5% to 37.2% year-on-year.
Poolman said the 42% rise in applications reflects both seasonal working capital needs and a growing appetite for longer-term investment.
“Many emerging businesses are seeking working capital to get through the major trading periods, while more established businesses are investing to grow; particularly while incentives like the $20,000 Instant Asset Write-Off remain in place through to 30 June 2026,” he said.
Stronger household demand and new business formation are adding momentum. Household spending rose 6.3% year-on-year in November (seasonally adjusted ABS data), while more than 1.3 million new Australian business numbers were registered in 2025 – a 39%+ jump according to the Lawpath New Business Index.
From 1 July 2026, Payday Super reforms will require employers to pay the 12% superannuation guarantee at the same time as wages, rather than quarterly.
Bill Baker (pictured right), CEO of SaaS platform Lend, warns this will materially change how lenders assess SME cash flow and serviceability.
“Under the quarterly system, unpaid super effectively sat inside the business as a short-term liquidity buffer,” Baker said. “That meant bank statements often showed higher average balances, stronger month-end positions, and more headroom in offset and redraw accounts. Lenders use all these inputs in their serviceability and risk models.”
Once super is paid alongside wages, “that buffer disappears”.
Lend’s modelling shows that for a typical SME, “a 1% cash flow hit can absorb between 9% and 18% of surplus cash. Depending on the lender’s model, that can translate into a 7–15% reduction in borrowing capacity,” Baker said.
For brokers, the message is clear: SME appetite for funding is rising, but future capacity will be tested. Commercial brokers are already starting to “reassess SME cash flow under Payday Super assumptions” to help clients understand their post-reform borrowing position.
In practice, that means adopting lender-style serviceability tools and predictive modelling, pressure-testing offset and redraw behaviour, and educating SME clients that Payday Super is not just a payroll change but a borrowing issue.
Brokers who model the impact early and position clients with the right facilities and lenders will be best placed to capture – and sustain – this new wave of SME growth.
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