High-Risk SMEs Intensify Credit Shopping Amid Tightening Conditions

According to Equifax's Business Market Pulse for Q1 2026, overall business credit demand experienced a marginal decline of 0.4% compared to the same period in 2025. However, within this landscape, a significant divergence has emerged. High-risk SMEs, defined as those with credit scores between 301 and 600, are engaging in 'credit shopping'—making multiple credit enquiries to different lenders—at a rate 2.9 times higher than their low-risk counterparts.

This trend suggests that subprime SMEs are facing heightened challenges in securing financing, prompting them to cast a wider net in their search for credit. The increase in credit shopping among these businesses may be attributed to several factors:

• Tightening Lending Criteria: Traditional lenders have become more cautious, implementing stricter credit assessments and approval processes, which can disproportionately affect high-risk borrowers.
• Economic Uncertainty: Ongoing economic challenges, including rising interest rates and inflation, have created a more volatile environment, making lenders more risk-averse.
• Cash Flow Pressures: Industries such as construction have reported a 49% increase in Australian Taxation Office (ATO) tax debt disclosures, indicating cash flow strains that may drive SMEs to seek additional financing.

For SMEs, particularly those with higher risk profiles, this environment underscores the importance of maintaining strong financial health and exploring diverse financing options. Engaging with financial advisors and leveraging alternative lending platforms can provide more flexible solutions tailored to their specific needs.

In conclusion, the current landscape presents both challenges and opportunities for Australian SMEs. By understanding the evolving credit market and proactively managing their financial strategies, businesses can navigate these conditions more effectively and secure the necessary funding to support their operations and growth.