Stronger competition in Australia's lending market has led to more favorable conditions that are benefiting the country's small businesses, the Australian Banking Association (ABA) said in a Monday report.

The ABA said 40% of Australian small businesses have sought bank finance as the margin lenders charge above the cash rate on small business loans has declined to a five-year low.

The country's banks are providing "record levels of lending," with small business credit outstanding rising to AU$750 billion from AU$567 billion in 2023, while one in four small businesses have experienced faster approvals for credit due to the deployment of new technology and systems, according to the report.

"We are seeing banks compete hard to win small business customers and that is translating into more competitive pricing for those businesses," said ABA CEO Simon Birmingham.