Small business borrowing flat lining as lender warns tax debt trouble brewing
Companies seeking cash to cover bad tax debts have soared, but not all of them are able to access it.
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Bad tax debts are seeing more businesses barred from accessing cash from commercial lender Banjo Loans, with the private financier reporting a flatlining in new applications amid sluggish economic growth.
Revealing a 2 per cent lift in lending across 2024, Banjo Loans boss Guy Callaghan warned confidence has slipped from Australia’s small businesses due to concerns of soft consumer spending and prolonged higher interest rates.
Mr Callaghan said while businesses pumped up borrowing in October, this proceeded to flatline throughout November and December, despite the normal buzz of holiday months.
This saw new lending applications end the quarter 15 per cent down on where they were in the third quarter of 2024.
The Banjo Loans boss, who oversees the lender which offers financing to small and medium enterprises across the Australian business landscape, said despite the subdued appetite for new lending he wasn’t seeing a bump in arrears, beyond a few missed payments in December.
“This is not a great thing, it’s saying the economy is wary of what’s happening,” Mr Callaghan said.
“The larger SMEs are still coming in for some loans, but the smaller ones are shying away.”
Despite this, the average loan size lifted 16 per cent in the period, with Banjo Loans data showing companies with $10m or more in revenue lifting their borrowing to their highest point in a year.
Mr Callaghan said he didn’t expect a rate cut in February, cautioning it may mean a higher-for-longer borrowing cost environment for Australia’s businesses.
The business veteran said this was coupled with more companies grappling with elevated tax debts and an assertive Australian Taxation Office.
Banjo Loan reported a doubling of applications declined due to major ATO debts.
Mr Callaghan said he’d seen a 60 per cent jump in declines related to tax debts over the past five quarters.
Australian Securities & Investments Commission data, for the first half of the 2025 financial year, reveals a 47 per cent jump in corporate insolvencies.
This saw 7483 companies fail in the six months to December 31, with many failures coming as the ATO pushed companies into administration for failing to pay tax debts.
Mr Callaghan said the figures likely reflected the mopping up of “zombie companies”, which survived the Covid-19 period due to loan and tax relief, but were unable to outlast normal operation conditions.,
Mr Callaghan said despite the challenging conditions lending at Banjo Loans was continuing to grow, but noted it was “as rapidly as we forecast it would at the start of the financial year”.
“We’ve got our arrears under control, but it’s not growing at the pace anyone hoped or envisaged, there’s a lot more pain out there,” he said.
“There’s a part of the market that’s really switched off, that’s the businesses earning less than $2m a year.”
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Originally published as Small business borrowing flat lining as lender warns tax debt trouble brewing
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