Australian Businesses Face Higher Borrowing Costs Amid Changing Economic Conditions

Australian businesses are operating in an environment of higher borrowing costs and changing economic conditions. According to the Reserve Bank of Australia (RBA), lending competition among banks and non-bank lenders remains strong, helping businesses maintain access to credit.

However, smaller businesses can be more exposed to higher interest costs and cash-flow pressures. The average interest rate on new small-business loans in July 2026 was 7.44% per year, while medium-sized businesses paid an average of 6.26% and large businesses paid 5.54%.

Lenders consider various factors when determining the interest rate for a business loan, including revenue, cash flow, trading history, credit history, security, and the purpose of borrowing. Secured loans often have lower interest rates than unsecured loans, but may require collateral and pose risks to the business if not repaid.

Businesses should carefully consider their financial position and ability to repay before applying for a loan. Lenders may also assess the credit profile of the business and its directors when making lending decisions.