Property loans have been the biggest driver of small and medium-sized business borrowing from banks, accounting for almost half of the sector’s total credit over the past five years, according to an Australian Banking Association report.
The report, prepared by economic advisory firm Mandala, found that banks extended $184 billion in new loans to SMBs in 2025, up from $101 billion in 2020. But property purchases alone accounted for 39% of that lending, making it the largest category of business borrowing.
Lending to small businesses rose 60% over the period to $60 billion, while credit to medium-sized businesses increased 95% to $123 billion. Apart from property-related borrowing, general business operations amounted for 21% of new lending, followed by plant and equipment finance at 17% and construction-related lending at 11%.
ABA chief executive Simon Birmingham said it was these loans that helped generate $110 billion in economic activity last year and supported over 580,000 jobs.
“This report shows lending to small businesses, and our agricultural sector is at record levels,” he said.
“Banks have also helped over 670,000 first home buyers realise the dream of home ownership in the past five years, while supporting the construction of over 110,000 new homes last year.
Birmingham added Australia has one of the strongest banking sectors in the world and strong banks allow for more lending for people to buy homes, credit for businesses to grow and more capacity to support community initiatives.
“The value of investments by households in Australian banks has nearly doubled from $240 billion to $470 billion over the last 15 years. Ensuring our banks remain strong and profitable will deliver better retirement incomes back to households,” he said.
The report also shows that margin that banks earn on SMB loans, measured against the RBA cash rate, has fallen by 39 basis points since 2021.
The ABA pointed the decline to stronger competition. It said the condition was beneficial for both mortgage holders and small businesses.
“Households with mortgages have been the big beneficiaries of a highly competitive banking sector. Strong competition amongst banks is seeing more than 640,000 mortgage holders refinance their home loans each year,” Birmingham said.
“This competition has also extended to small business lending with credit becoming more affordable. Lower borrowing costs supports more investment, more jobs and more output from this crucial part of the economy.”