One in Three Small Businesses Now Borrow Outside the Banks.

A third of Australian SMEs sourced lending from a non-bank lender in the past 12 months. And 92% have either used one or would consider it. The numbers come from ScotPac's latest SME Growth Index, surveying 728 businesses with revenue between $1 million and $20 million.

The shift has been building for years. But one stat in the report captures how quickly the ground has moved: the share of SMEs who said banks are pulling back from lending to businesses like theirs jumped from 3% in 2018 to 12% today. That's a fourfold increase in perceived bank appetite decline, and it matches what brokers and business owners have been saying for a while. Banks aren't rejecting SMEs outright. They're making the process slow enough, restrictive enough, or collateral-heavy enough that the answer might as well be no.

The collateral question is driving the shift

The top reason SMEs gave for going non-bank wasn't speed or convenience. It was collateral. 19% said they went non-bank to avoid pledging personal guarantees or property-backed security. Another 16% specifically cited not wanting to use the family home as loan collateral.

That's 35% of switchers whose primary motivation was keeping their personal assets separate from their business borrowing. For a generation of business owners who watched what happened during COVID, when personal guarantees turned business closures into personal financial crises, this isn't abstract. It's a lesson they learned firsthand.

Speed and simplicity came next. 17% cited streamlined onboarding and less paperwork. 16% cited faster access to funds. These are real differences. A bank business loan application can take four to six weeks to reach approval. Many non-bank lenders operate in days.

What non-bank actually means now

The term "non-bank" used to carry a stigma, as though it meant second-tier or last resort. The data says otherwise. SMEs using non-bank lenders sourced an average of 67% of their total borrowings from a single non-bank provider. These aren't emergency top-ups. Businesses are making non-banks their primary lending relationship.

The products have evolved too. Asset-based lending, invoice finance, debtor finance, working capital facilities, and equipment finance all allow businesses to borrow against their trading activity rather than property. A transport company can borrow against its receivables. A manufacturer can finance equipment off the asset itself. The loan is backed by the business, not the owner's house.

ScotPac CEO Jon Sutton put it directly: "Non-bank lending is no longer viewed as a niche or secondary funding option."

What to do with this

If your business has grown since you last set up your lending, your borrowing structure probably hasn't kept pace. Most SMEs open a bank facility early on and never revisit the question of whether that's still the right fit. The business outgrows the lending arrangement, and the owner compensates by putting up more personal security rather than rethinking the structure.

Start with a simple question: what percentage of your current borrowing is secured against personal property versus business assets? If the answer is mostly personal, you're carrying risk that may not be necessary any more. Non-bank lenders routinely write against receivables, equipment, and trading history. The documentation is different. The speed is different. And increasingly, the pricing is competitive.

The other question worth asking your accountant: are your lending arrangements structured around your business as it was two years ago, or as it is now? Revenue growth, repeat customers, and consistent trading history all open doors that weren't available when you started. If you haven't tested the market recently, you're relying on assumptions that may be out of date.

This article is general information only and is not financial advice.