Three years ago, nearly half of investing small businesses planned to fund growth through a bank. Today that figure is 31%. The share eyeing non-bank finance has climbed to a record 61%, up from 19% in 2019.
The numbers come from the September 2026 SME Growth Index by lender ScotPac, based on East & Partners interviews with 727 businesses earning between $1 million and $20 million a year. Interviews finished in July. It is one survey of one slice of the economy, so treat it as a signal, not a verdict.
Non-bank finance for SMEs has flipped from niche to default
About three in five of the surveyed firms intend to invest over the next six months. Of those, 61% would lean on non-bank lenders. Bank-funded plans sit at 31%, well below the 2023 high of 48%.
That is a big swing in a short time. Non-bank lenders tend to move faster, accept more varied security and cash flow profiles, and charge more for it. For a business with a tight window to buy equipment, stock or a site, speed can matter more than price. The survey does not say which factor is driving the shift, so be wary of anyone who claims to know.
Key numbers
- 61% of investing SMEs plan to use non-bank finance (19% in 2019)
- 31% plan to use bank finance (48% at the 2023 peak)
- 56% expect revenue growth averaging 12.7%
- 37% expect declines averaging 15.1%
Two camps that barely overlap
The outlook data is unusually split. The survey found that 56% of SMEs are forecasting higher revenue, with the average expected gain sitting at 12.7%, the strongest result the index has recorded. On the other side, 37% anticipate a drop in revenue, averaging 15.1%, and that too is a record. Only 7.4% expect things to stay flat.
That is not a business community drifting sideways. It is two groups seeing very different economies. The report’s takeaway for brokers is that one pitch will not fit both: growth-minded firms want funding that scales with expansion, while shrinking firms need breathing room.
It also matters for lenders on any side of the fence. A book that looks healthy on average can hide a large cohort heading into trouble.
Payday Super lands on cash flow
Payday Super took effect on 1 July 2026. Employers must now pay super within seven business days of each pay run, rather than quarterly. In plain English, cash that used to sit in the business for weeks now leaves sooner.
Only 26% of respondents say they are ready or unaffected. A negative impact is expected by 83% of smaller SMEs, compared with 64% of larger ones. Around 37% plan to seek outside funding to cope, mostly payroll finance (16%) and invoice finance (10%).
One analysis suggests borrowing capacity could shrink by up to 15%. That figure comes from the commentary around the report, not the survey itself, so read it as a rough warning rather than a measured outcome.
Tax and compliance costs now rank as the top worry at 20%, ahead of cash flow. The national audit office puts the collectable small business tax debt at $35.9 billion for 2024-25, and the tax authority is now pursuing recovery more quickly.
Does leaving the banks reduce risk, or just move it?
This is the question the data raises but cannot answer. There are two fair readings.
The optimistic one: a more varied funding base means no single channel is carrying all the weight. If banks tighten, other lenders fill the gap, and businesses keep investing.
The sceptical one: risk does not vanish when it leaves bank balance sheets. It sits somewhere else, often with less visibility. Non-bank lenders typically fund themselves differently, and they can pull back quickly if their own funding costs rise or investors get nervous. A business that borrowed because the bank said no is also, by definition, a business the bank judged riskier.
The survey gives no default or arrears data, so neither reading can be proven here. What it does show is direction: more small-business credit is being arranged outside the traditional perimeter.
Why property readers should care
Many SMEs are property-adjacent. Builders, tradies, agents, landlords with business structures and developers all rely on short-term working capital and trade finance. If payroll pressure and tighter bank appetite push them toward pricier funding, margins thin and project timing can slip.
That feeds into supply, renovation activity and, eventually, how robust local property markets feel. For a related angle on household stress, see our look at mortgage arrears and distressed listings. And for owners holding property inside super structures, our guide to super, SMSF and property funds covers how those rules interact with cash flow.
What to check if you are borrowing
- Total cost, not headline rate. Non-bank finance often carries fees and tighter terms. Compare the full repayment picture.
- What happens at renewal. Ask how pricing and limits can change.
- A cash buffer for super. With seven-day super timing, a short squeeze can arrive faster than before.
- Your adviser’s incentives. Ask how they are paid and which lenders they compared.
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General info, not financial advice.
