Australia’s small businesses are showing signs of a return to growth, with new data from OnDeck Australia revealing a sharp rise in borrowing for expansion rather than short-term survival.
OnDeck recorded a 42 per cent year-on-year increase in loan applications in the December quarter 2025, with 34 per cent of applicants seeking funding to expand their businesses, up from 23 per cent a year earlier.
The shift suggests a growing cohort of SMEs is looking beyond cash-flow management and investing in longer-term growth, despite ongoing cost pressures and elevated interest rates.
OnDeck CEO, Cameron Poolman said the data pointed to a shift in borrowing behaviour among SMEs.
“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,” Mr Poolman said.
The strongest lift in finance demand was seen in Western Australia, where loan applications doubled compared with the same period last year, while South Australia recorded the most dramatic change in intent, with the share of expansion-related applications jumping from 15.5 per cent to 37.2 per cent.
All states recorded growth in expansion-related applications, underscoring an improvement in sentiment across the country.
“Expansion” tops loan reasons
OnDeck’s data shows that business expansion is now the leading driver of funding demand, accounting for more than one-third of all applications in the December quarter, followed by equipment purchases, and inventory and stock.
Across the states, South Australia recorded the biggest shift toward growth-related funding, with the share of applications for expansion rising by 140 per cent year-on-year to 37.2 per cent. The lift was also significant in Western Australia (up 77.8 per cent), Victoria (up 77.2 per cent) and New South Wales (up 51.2 per cent).
Mr Poolman said the 42 per cent rise in the number of applications during the December quarter reflected a mix of 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.
Household spending fuels finance demand
Consumer activity is providing a tailwind for many businesses, with household spending up 6.3 per cent year-on-year in November, based on seasonally adjusted figures by the Australian Bureau of Statistics (ABS).
“As confidence returns to households, it flows directly through to small businesses. That’s translating into higher demand for finance to fund expansion, manage cash flow and seize new opportunities,” Mr Poolman said.
“We see particularly strong demand from trades, retail and hospitality sectors, which are among the most exposed to consumer spending and seasonal trading cycles. These businesses often don’t have time to wait weeks for funding, which is part of the reason they seek out non-bank lenders.”
The increase in lending demand comes as new business formations accelerate. More than 1.3 million new Australian Business Numbers were registered in 2025, according to the Lawpath New Business Index, an increase of more than 39 per cent over the year.
| Top states by share of applications | % share of total applications | YoY growth in number of applications | |
| Q4 – 2024 | Q4 – 2025 | Q4 – 2025 | |
| New South Wales | 36% | 38% | 48% |
| Victoria | 32% | 28% | 25% |
| Queensland | 18% | 19% | 54% |
| Western Australia | 6% | 8% | 100% |
| South Australia | 5% | 4% | 10% |
| % of loan applications for “expansion” | Q4 – 2024 | Q4 – 2025 | YoY growth in expansion-related applications |
| New South Wales | 22.3% | 33.8% | 51.2% |
| Victoria | 20.1% | 35.7% | 77.2% |
| Queensland | 30.3% | 31.8% | 4.9% |
| Western Australia | 21.2% | 37.6% | 77.8% |
| South Australia | 15.5% | 37.2% | 140.0% |