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Recent data from Equifax's Business Market Pulse for Q1 2026 reveals a significant shift in borrowing behavior among Australian small and medium-sized enterprises (SMEs), particularly those classified as high-risk.
While overall business credit demand has remained relatively stable, subprime SMEs are increasingly approaching multiple lenders in search of financing solutions.
The report indicates that 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. This trend suggests that these businesses are facing challenges in securing financing through traditional channels and are therefore broadening their search to include multiple lenders.
Brad Walters, General Manager of Commercial at Equifax, noted that this pattern has been building over the past few months and is now at its highest level in the last eight months. He highlighted a divergence in how Australian businesses are approaching the credit market, with low-risk firms maintaining existing banking relationships, while higher-risk SMEs are casting a wider net in their search for funding.
Several factors contribute to this trend. Economic uncertainties, such as rising fuel costs, inflation, and interest rates, have placed additional financial strain on SMEs. Industries like construction and logistics have been particularly affected, with increases in tax debt disclosures and insolvencies indicating cash flow challenges. In response, high-risk SMEs are intensifying their efforts to secure financing, often by applying to multiple lenders simultaneously.
For SMEs navigating these challenging conditions, it's crucial to approach credit shopping strategically. While seeking multiple financing options can increase the chances of securing necessary funds, it's important to be mindful of the potential impact on credit scores and the terms of the loans offered. Engaging with financial advisors and exploring alternative financing solutions, such as non-bank lenders or tailored financial products, may provide more suitable options.
In conclusion, the current economic landscape presents both challenges and opportunities for SMEs. By understanding the factors driving the surge in credit shopping among high-risk businesses and adopting informed strategies, SMEs can better position themselves to access the financing needed to sustain and grow their operations.
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That 33% figure for subprime SMEs is pretty telling, but I do wonder how many owners realise that too many enquiries can make business loan eligibility even harder later on. Feels like some guidance before applying everywhere would save a lot of stress.