Leading non-bank lender, Banjo Loans has reported a 40% drop in year-on-year loan applications from small and medium enterprises (SMEs) in its latest SME Business Barometer, a sign that Australia’s weak economy is forcing small businesses to pause growth plans and enter a period of conservation.
Banjo Loans CEO, Guy Callaghan said while the financial year’s final quarter is traditionally a strong one for SME borrowing, this was not the case for the April to June 2024 period.
“Australian SMEs appear to have gone into hibernation. We may have seen some green shoots in the data from earlier this calendar year, but these latest findings indicate that long term subsistence is the mood of the day,” he said.
“SMEs seem to be bracing for ongoing weak business conditions in the short to mid-term and they’re turning away from new finance. In addition to being down 40% year-on-year, loan applications fell 20% over the quarter.”
Callaghan said the data indicates that Australia’s sluggish economic growth is starting to bite, and that expectations of near-term interest rate and cost-pressure relief have dimmed.
“The underwhelming performance is particularly evident now in the largest economic states of Victoria and New South Wales,” Callaghan added.
The value of loans to SMEs in NSW has fallen 50% this past year. Meanwhile, the number of loans drawn in the state compared to the previous quarter doubled, reversing an established downward trend. In Victoria, the number of business loans almost halved for the quarter and is down 41% year-on-year.
“At an industry level, there are positive signs among pockets of the services sector, with financial and insurance providers doubling their applications over the year, but apart from that, it is not a positive reading.”