High-Risk SMEs Intensify Credit Shopping Amid Tightening Conditions

According to Equifax's latest Business Market Pulse for Q1 2026, overall business credit demand edged down by 0.4% year-on-year. However, beneath this modest decline lies a stark divergence: high-risk SMEs are now making multiple credit inquiries at a rate 2.9 times higher than their low-risk counterparts. Specifically, credit shopping among subprime borrowers (with credit scores between 301 and 600) has risen to 33%, compared to just 7% for low-risk entities.

Brad Walters, General Manager at Equifax, notes that this pattern has been building over several months and is now at its highest level in the past eight months. He observes a polarization in how Australian businesses are approaching the credit market, with many low-risk firms maintaining existing banking relationships, while higher-risk SMEs are casting a wider net in their search for funding.

This trend is particularly pronounced in sectors like construction, where non-company insolvencies have risen by 16% year-on-year in Q1 2026, and new Australian Taxation Office (ATO) tax debt disclosures have surged by 49%. These indicators suggest mounting cash flow strain among smaller operators, who may be prioritizing operating expenses over tax obligations.

For SMEs, this environment underscores the importance of understanding one's credit profile and exploring diverse financing options. Engaging with financial advisors and leveraging platforms that compare various lenders can provide valuable insights and improve the chances of securing suitable funding.

In summary, while the overall demand for business credit remains relatively flat, the intensified credit shopping among high-risk SMEs highlights the challenges these businesses face in accessing finance. Proactive financial management and strategic planning are essential for navigating these tightening conditions.