Navigating The Q2 2025 SME Lending Landscape For A Strong EOFY
As the end of FY26 approaches, small Australian businesses are navigating a unique economic landscape marked by opportunity and strain. By understanding trends in the evolving SME lending market and quickly implementing the right finance options, brokers can potentially have a tangible impact during this crucial window.
This post explores the current SME lending environment, using findings from Lumi’s Q2 2025 Market Pulse Report with data gathered from 571 Australian SMEs and other key financial updates.
We’ll unpack SMEs’ finances and funding needs, and how brokers can better support their Australian business clients for a strong EOFY.
What Happened In Q1
2025’s Q1 set the tone for what has become a defining period in SME lending.
The RBA’s April 2025 Financial Stability Review pointed to tightening financial conditions, particularly for small businesses that lack cash reserves or access to traditional bank loans.
Meanwhile, the Australian Banking Association’s March 2025 Banking by Numbers SME report noted that SME lending growth softened in Q1.
This is partly due to stricter lending criteria and longer approval times at traditional institutions.
Despite this, Australian businesses didn’t lose momentum.
Lumi’s report reveals that 78% of SMEs are still experiencing strong or robust demand for their products and services.
This confidence in the Australian economy, paired with operational challenges like delayed receivables and inflation, creates a dual dynamic: businesses are keen to grow but are often short on capital.
SMEs need fast, flexible capital that major banks aren’t always positioned to provide.
Brokers who can articulate the value of alternate lending and deliver speedy resolutions can benefit their SME clients.
Q2 And Beyond For Brokers And SMEs
Looking ahead, Q2 shows no signs of slowing.
Both SMEs and larger firms are doubling down on growth, and many are doing so with broker support. According to Lumi’s Q2 2025 Market Pulse Report:
- 64% of Australian SMEs have increased their growth targets.
- 55% of small and medium businesses plan to seek external funding within the next 12 months.
- 36% now prefer non-bank lenders due to speed and flexibility.
The combination of ambition and urgency creates great opportunities for brokers.
Sectors like trades, hospitality, construction, and retail continue to seek working capital and short-term small business loans to stay responsive to demand.
Brokers can assist in this growth period by helping business owners capitalise on peak periods, prioritise future investments, hire new staff, or take on larger contracts.
Moreover, brokers are now more likely to be the first call when funding is needed.
With 52% of SMEs already relying on brokers to look for business loans, there’s a clear shift toward third-party finance specialists who offer tailored advice, better access to funding options and help them make better credit decisions.
EOFY Insights: The Current State Of SME Lending
During EOFY, businesses are making key financial decisions that affect tax outcomes, cash flow, and next-year planning.
Brokers who understand the current trends in the evolving lending market can recommend credit decisions and access to relevant lending solutions that meet these evolving needs.
Small Businesses Continue To Experience Solid Demand
Despite economic uncertainty, both Australian small businesses and larger firms are thriving in demand-led markets with the economy’s output increasing.
According to Lumi’s latest survey:
- 78% of small businesses report strong or very strong demand.
- 77% saw improved financial performance in the first half of FY25.
This signals a clear departure from the conservative spending patterns seen during COVID-era uncertainty.
In general, businesses are now more confident in both the Australian market and their capacity to grow.
For brokers, this means SME lending conversations don’t have to be defensive.
Instead of focusing on plugging gaps, discussions can revolve around expansion and new opportunities.
This includes financing new product lines, boosting marketing efforts, or funding capacity upgrades.
These could be vital for small businesses trying to make significant leaps in growing their business models in the Australian economy.
SMEs Are Aiming For Continued Growth
Businesses are actively pursuing strategic goals, not just managing overheads. Lumi reports that:
- 64% of SMEs have increased their growth targets for 2025.
- The top goals include:
- 47% focusing on customer acquisition.
- 40% are interested in improving efficiency.
- 30% investing in innovation.
This marks a crucial shift from post-pandemic recovery to forward-facing investment.
Brokers may want to consider meeting this need by helping clients access equity funds purpose-built for operational upgrades, such as technology platforms, hiring, or automation.
Additionally, brokers can differentiate themselves by educating their clients on how strategic borrowing can improve working capital over time.
For example, funding a software system that reduces admin costs may not just support growth but also potentially free up cash in the long term.
Growing Taxes For Some SMEs Year-Over-Year
EOFY isn’t just about opportunity—it’s also when tax pressures become unavoidable. As of mid-2025, Lumi found:
- 36% of small and medium-sized enterprises reported increased tax debt.
- 74% are managing this via ATO payment plans.
Many businesses are facing higher tax obligations as a result of recent growth.
For brokers, this creates a case for structured lending options that may help manage tax proactively.
Advising clients to use business lending for tax settlement can seem unglamorous, but it can significantly aid them.
Tax compliance can protect credit ratings, avoid penalties, and free up future borrowing capacity.
Brokers who understand these dynamics can position themselves as problem-solvers in reducing risk and paying off debt.
Cash Flow Strain Remains A Persistent Issue
Cash flow is still the #1 source of pain for Australian SMEs in this economy. The data reveals:
- 82% of small and medium enterprises have under three months of cash reserves.
- 44% report delayed receivables as a core issue.
- 56% are using personal funds to bridge the gap.
These numbers show how common it is for business owners to self-fund, often at personal risk.
Brokers can advise a more innovative alternative: working capital loans, lines of credit, or invoice financing.
The key message here is sustainability.
Brokers may want to explain how consistent access to short-term capital can help smooth out receivables, fund payroll, or stock inventory without owners having to dip into their savings.
Fast Funding Remains A Consistent Need
When it comes to choosing new lenders, speed is king.
Here are a few data points on significant factors small businesses look for when looking for new loans.
- Speed of application and approval is now the most critical factor for small businesses when selecting a new lender.
- 36% of small and medium enterprises choose non-bank lenders over major banks for this reason.
SMEs are often chasing short windows of opportunity and delays can cost them real revenue.
For brokers, response time matters just as much as innovative advice or actionable insights.
If your loan provider partner takes days or weeks to respond, you may risk losing the client.
Fintech platforms or non-bank lender are designed to deliver approvals fast, helping brokers to win more deals and provide immediate value to their SME clients.
How Brokers Can Help Their Clients Beyond EOFY 2025
EOFY is a moment of heightened focus, but the work doesn’t end on June 30.
Smart brokers may want to use this period to set up innovative long-term client value heading into FY26.
Here’s how to help SME business clients survive and thrive by leveraging the existing lending market.
Discuss Growth Plans For FY2026
EOFY is a natural planning checkpoint.
It’s when small businesses are most likely to review strategy, project next-year revenue, and consider investments.
This makes it a perfect time to introduce lending as a planning tool.
Brokers can consider asking questions like:
- What projects are you delaying due to funding?
- Is there equipment or staffing you’d like to invest in with the right capital?
- Would early access to funds unlock new revenue channels?
Framing lending as part of business planning and investments, not a last-minute fix, can shift the conversation to partnership and proactive value with SMEs.
Find Flexible Sources Of Funding To Support New Opportunities
As banking policy tightens, non-bank lenders are becoming more relevant.
Lumi’s report shows that 36% of SMEs now prefer non-bank options, and not just for the quicker approval speed.
Features like no ongoing fees, early repayment options, and grace periods are helping businesses manage risk more effectively.
For instance, Lumi’s Payment Pause feature lets borrowers hit pause during cash crunches without fees.
That kind of flexibility can give brokers confidence to recommend SME lending even to clients in more volatile industries like hospitality or construction.
Non-bank lenders often offer access to non-collateral/security lending, which means the loan doesn’t require upfront property to be applied for.
This can be a significant factor in SMEs choosing one lending provider over another.
Strengthen Referral Network
Trust is the top driver of broker selection in the lending market.
- 51% of small businesses find their broker via referrals.
- 60% of small businesses trust their brokers when looking for finance options.
This means brokers who deliver real value during EOFY will reap the rewards through organic customer growth.
The economy and current market trends mean clients typically need trustworthy advice to pick the right lending options.
Now’s the time to consider tightening up communications, exceeding service expectations, and asking happy customers for testimonials or introductions to other SMEs needing business lending options.
Build EOFY Lending Toolkits
EOFY is full of complexity, from tax deductions to asset purchases to compliance audits.
Brokers can simplify business lending for small business customers by offering “lending kits” that include:
- Simple explanations of Instant Asset Write-Off eligibility
- Checklists for common EOFY finance actions
- Templates for tracking funding against tax reporting
Even though 71% of SMEs say the recent Instant Asset Write-Off (IAWO) policy changes won’t affect their borrowing plans, according to the Lumi’s Q2 2025 Market Pulse Report, many are still unsure how best to use their remaining purchasing power.
Helping them act before the cutoff builds confidence and positions brokers as financial navigators, not just transaction managers.
Conclusion
With confidence holding firm but cash flow and tax burdens growing, small business owners are relying on brokers more than ever to deliver fast, flexible, and strategic financial solutions.
Whether your customers need working capital, tax management tools, or innovative FY26 planning support, you may want to move now.
Move quickly, speak clearly, and build trust. Because brokers who deliver during EOFY can become partners for the long haul.
Ready to support your clients with fast, flexible funding this EOFY? Explore Lumi’s broker tools and lending solutions and get in touch with Lumi today.
