Rate pause stalls business borrowing
Banjo Loans is seeing small and medium businesses delay borrowing in the wake of the RBA’s shock interest rate hold call.
Business
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The recent move to hold the cash rate steady is triggering a delay in business investments, with small business lender Banjo Loan pointing to a borrowing pick-up over the final quarter of the 2025 financial year.
Publishing its latest barometer of business borrowing, Banjo Loans boss Guy Callaghan said it was clear small and medium enterprises were delaying decisions in the wake of the Reserve Bank’s recent rates call.
Mr Callaghan said there had been positivity around the cuts earlier in 2025, but the surprise decision to hold rates at 3.85 per cent would see tough trading conditions remain for small business.
“Consumers still aren’t spending, that’s where SMEs are getting hurt,” he said.
“Consumers drive their revenue flow, if they’re not spending where they want them to be, that’s why small businesses are hurting.”
Mr Callaghan said in the wake of the RBA’s rates call, many borrowers had delayed their loan drawdowns or applications.
He noted the current rates enviroment was also leading to Banjo Loans declining loans, as borrowers struggle to meet serviceability tests.
Tax debts and poor credit are also haunting business customers, with Banjo Loans noting many borrowers were being turned down amid concern over their financial health.
Banjo Loans, a privately held small business lender, is one of several non-bank players writing financing across Australia.
The latest barometer from Banjo Loans showed borrowing was up 32 per cent in the quarter on levels posted in the third quarter of the financial year, covering the Christmas-New Years period.
The value of new lending was up 22 per cent, with borrowers turning over $20m or more driving business.
Mr Callaghan said Banjo’s data was showing “crocodile teeth”, with jagged lending activity over the past financial year.
He said this made it hard to predict what the first quarter of the new financial year would yield.
“You get some confidence and people realise its still tough and it drops again,” he said.
Mr Callaghan said despite the recent chatter about the banks getting back into business borrowing, many were still taking too long to make a decision around loans.
He said this was leading businesses to continue looking to the non-bank sector for finance.
“The majority of our clients are bank clients and have a relationship with a bank, but they know they can’t go to the bank because they won’t get funding in time,” he said.
Mr Callaghan noted National Australia Bank, which has been under pressure as its business lending book retreats, had to “lift its game, because other businesses have cottoned on to it”.
“It’s only for those larger deals with the largest businesses is when we come up against banks,” he said.
Mr Callaghan said arrears were remaining constant, noting in retrospect the 2025 financial year had proved “tougher than we thought it was going to be”.
Originally published as Rate pause stalls business borrowing
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