Non-Bank Lenders Escalate Legal Actions Amid Rising SME Insolvencies

The Alares Credit Risk Insights report indicates that non-bank lenders have steadily escalated court actions since 2019, reaching record levels in 2025. In contrast, the big four banks peaked in their court activities in 2024 but have since decreased their enforcement efforts. This divergence suggests a structural shift in lending and recovery practices within the financial sector.

Andrew Spring, partner at Jirsch Sutherland, commented, "While the ATO remains the dominant source of court action, non-bank lenders are accounting for an increasing share of insolvency-related enforcement as the major banks step back." This observation underscores the growing influence of non-bank lenders in the SME financing landscape.

As traditional banks tighten their lending criteria, more SMEs are turning to non-bank lenders for financing. However, this shift comes with increased risks, as non-bank lenders may adopt more aggressive recovery strategies. Business owners are advised to exercise caution and seek professional advice when considering non-bank financing options.

In conclusion, the rise in non-bank lenders' court actions amidst increasing SME insolvencies highlights the need for SMEs to carefully evaluate their financing choices and be prepared for potential legal challenges in the current economic climate.