Small Business Credit Stress Is Building Across Australia

ABC business coverage of Equifax’s May Business Market Pulse highlighted several warning signs. Severe delinquencies, where business debts are more than 91 days overdue, rose to 11.3 per cent of overall market debt in April, up from about 8 per cent in March. New ATO tax defaults also climbed 47.9 per cent year on year, suggesting some businesses may be delaying tax payments to preserve working capital.

The data does not suggest all businesses are pulling back equally. Large enterprise business loan demand was up 15 per cent year on year, indicating bigger firms may still have the balance sheet strength to increase borrowing. By contrast, SME business loan demand rose by a more modest 9.1 per cent, while unincorporated small business insolvencies increased 9.3 per cent over the year.

Asset finance is another area showing caution. Applications fell 2.1 per cent among large corporate enterprises and 4.1 per cent among SMEs, pointing to a pause in spending on machinery, vehicles, fleets and equipment. For small business owners, that may reflect a practical decision to preserve cash rather than commit to new repayments in an uncertain trading environment.

This is an important extension of earlier signs that higher-risk SMEs have been shopping around for credit more actively. The latest figures suggest the issue is moving beyond loan enquiries and into repayment behaviour, tax arrears and insolvency risk. That matters because lenders typically look closely at ATO debt, repayment history, cash flow consistency, director conduct and recent credit enquiries when assessing business loan applications.

For borrowers, the takeaway is not to panic, but to prepare. If a business needs funding, it is better to organise financial statements, BAS records, tax payment arrangements and cash flow forecasts before approaching lenders. ATO arrears do not automatically rule out finance, but unexplained or unmanaged arrears can make approval harder and may increase the cost of borrowing.

Businesses considering a refinance, working capital loan or equipment purchase should compare options carefully rather than relying on the first offer available. Where the situation is complex, speaking with experienced finance brokers may help match the loan structure to the business’s risk profile, repayment capacity and timing needs.