Australian small businesses are borrowing again, but this time it’s about growth, not survival. New OnDeck data reveals where businesses are investing and what’s driving the shift.

After several years of operating in survival mode, Australia’s small businesses are starting to expand their horizon and think big. The latest data from non-bank lender OnDeck Australia shows a shift in why small business owners are borrowing, with expansion now overtaking short-term cash-flow fixes as the main reason  for seeking finance.

In the December quarter, loan applications jumped 42 per cent year-on-year, with more than one-third of applicants saying they were borrowing to grow their business. That’s up from just 23 per cent a year earlier.

OnDeck suggests it’s a sign that, while costs and interest rates remain high, confidence is slowly returning to the sector.

From survival mode to growth plans

For much of the past few years, borrowing by small businesses has been largely defensive. Loans were used to plug cash-flow gaps, manage rising costs or simply stay afloat. OnDeck says that motive appears to be changing.

According to OnDeck’s latest figures, 34 per cent of small businesses applying for finance in the December quarter planned to use the funds for expansion, making it the single biggest reason for borrowing.

OnDeck CEO Cameron Poolman says the data points to a genuine change in mindset.

“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.

Maintaining seasonal working capital still remains a driver, however, more established businesses are starting to invest in longer-term growth rather than just getting through the next quarter.

WA and SA lead the charge

The shift toward expansion is happening nationwide. OnDeck’s data shows all states recorded growth in expansion-related loan applications, which is good news for business confidence..

Leading the pack was Western Australia, with loan applications doubling compared with the same period last year. Queensland and New South Wales also recorded strong growth, up 54 per cent and 48 per cent respectively.

South Australia, however, showed the biggest change in intent. The share of loan applications for expansion in SA jumped from 15.5 per cent in the December quarter of 2024 to 37.2 per cent a year later. That’s a 140 per cent increase in growth-related applications.

Poolman says the trend reflects a return to business confidence.

“Many emerging businesses are seeking working capital to get through the major trading periods, while more established businesses are investing to grow,” he said.

Why expansion is back on the agenda

So what’s driving this renewed appetite to grow? One factor is incentives. Poolman suggests the government’s $20,000 Instant Asset Write-Off is one factor driving growth. With the scheme in place until 30 June 2026, businesses looking to invest in equipment are taking advantage..

Another tailwind is consumer spending.

According to seasonally adjusted figures from the Australian Bureau of Statistics (ABS)  household spending rose 6.3 per cent year-on-year in November, . That flow-on effect is being felt directly by small businesses.

“As confidence returns to households, it flows directly through to small businesses,” Poolman said.
“That’s translating into higher demand for finance to fund expansion, manage cash flow and seize new opportunities.”

Trades, retail and hospitality punching above their weight

Not all sectors are feeling the uplift equally, but some are clearly leading the charge. OnDeck is seeing particularly strong demand from trades, retail and hospitality businesses. These sectors tend to be most exposed to consumer spending and seasonal trading cycles, and often need fast access to funds.

“These businesses often don’t have time to wait weeks for funding, which is part of the reason they seek out non-bank lenders,” Poolman said.

the demand for increased lending also comes as more Australians start businesses. More than 1.3 million new Australian Business Numbers were registered in 2025, according to the Lawpath New Business Index, up more than 39 per cent over the year.

For small business owners watching from the sidelines, the data offers a useful reality check. While challenges haven’t disappeared, many peers are clearly moving from ‘hold tight’ to ‘what’s next’. That doesn’t mean reckless spending, but it does suggest there’s a growing willingness to invest when the numbers stack up.

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