Sectorial ATO Tax Debt Disclosures Rise, Overall Business Credit Demand Flattens and High-Risk SME 'Credit Shopping' hits 8-month peak

Equifax Business Market Pulse: Q1 2026 Business Credit Trends 

Overall Business Credit Demand (Q1 2026 vs Q1 2025):

• Overall business credit demand: flattened at -0.4% 
• Business loan demand: flattened at +0.8% 
• Trade credit demand: decreased by -11.9% 
• Asset Finance demand: up by +3.1% 
• SME credit demand: decreased by -7%
• High-Risk SME Credit Shopping: Activity is 2.9x higher than low-risk counterparts
• ATO Tax Debt Disclosures: Spiked by +49% in the construction sector

SYDNEY – 13 May 2026 – The latest Equifax Business Market Pulse for Q1 2026 reveals signs that Australian businesses have been responding to an everchanging environment, encompassing rate rises and rising energy and fuel costs.

Australia credit demand may have reached a point of surface-level stability in the first quarter of 2026, with a marginal -0.4% decrease YoY. However, this stability differs from the second half of last year where credit was expanding, notably across business loans. Below the surface, Equifax data reveals nuanced differences in how businesses are navigating current economic pressures.

“The Equifax Business Market Pulse for Q1 2026 shows growth in business loans and trade credit running below trend. More positively, asset finance has retained some resilience. This resilience is especially important given that business investment spending is a key component underpinning many economic growth forecasts. Some industries are reporting rising trade payment days and rising tax debt. A gap has also emerged between larger companies compared to Small & Medium sized Enterprises (SMEs),” observed Brad Walters, General Manager, Commercial at Equifax.

In particular, a behavioural gap has emerged in the search for credit, with high-risk SMEs now credit shopping - making multiple enquiries to different lenders within a 30-day period - at a rate 2.9 times higher than their low-risk counterparts. 

This surge in activity among sub-prime borrowers comes as overall SME demand contracted by -7.0% YoY in Q1 2026, as this cohort of borrowers scaled back on enquiries in response to interest rate increases and inflation impacts. Coupled with this are also some signs of a tightening in lending conditions, with some firms reporting that finance became more difficult to obtain over the quarter*.

The Equifax Business Market Pulse shows that while credit shopping among low and medium-risk segments has shrunk, activity among high-risk SMEs (scores of 301-600) surged to 33% in Q1 2026, compared to just 7% for low-risk entities.

Brad Walters, General Manager, Commercial at Equifax, said "What we are seeing today is the culmination of a trend that has been building over the past few months, and is now at its highest levels in the last eight months.” 

“We are seeing a divergence in how Australian businesses are approaching the credit market. For the majority of stable, low-risk entities, there is a sense of 'rate resignation' - they are opting for the speed and certainty of known lending relationships. In contrast, high-risk SMEs seem to be in a state of accelerated credit shopping, having to cast a much wider approval net, often applying to four or five lenders to find an approval.”

“This surge then appears to be further amplified by shifts in market conditions such as rising fuel costs, inflation and interest rates." 

“Given the integral role small and medium enterprises play in the Australian economy, these developments within the SME sector are noteworthy. SMBs represent a significant portion of economic output and employment so shifts in this cohort are important for understanding broader economic trends.”

Application Quality Rises Amid Sub-Prime Credit Shopping Behaviours 

While there has been an elevation in credit shopping behaviours across sub-prime applicants, the relative proportion of higher-risk applicants remains similar to previous periods. However, the Equifax Business Market Pulse identified a slight improvement in the credit quality of higher-scoring applicants, which is supporting a small increase in the average credit quality across the entire applicant pool.

Building on the three-year highs established in late 2025, average business loan credit scores rose by 4 points YoY, reaching the highest levels seen in early two years. 

”This SME cohort continues to demonstrate resilience, maintaining higher credit scores, on average, relative to larger businesses. This suggests that while high-risk SME segments have scaled back their activity, a resilient and savvy group of SMEs remain active, prioritising strategic credit access despite broader market conditions.”

“The fact that average scores are still exhibiting relatively sound levels of credit quality on average, may partly reflect a narrowed field of applicants, but it also indicates that well-managed businesses are successfully adjusting to a 'new normal',” Walters added. 

“Following the resilience we saw in the mid-market last year, what we are potentially seeing here are businesses becoming even more selective about when, and how they borrow to ensure their balance sheets can withstand ongoing changes”.

Sector Insights: Construction and Logistics Credit Pressures 

The construction and logistics sectors both continue to demonstrate signs of pressure amid market conditions. 

Construction: While national company insolvency levels in the sector showed a small decline (or improvement) of -6.4%, business insolvencies (non-companies) continued to climb 16% YoY in 26Q1. New ATO tax debt disclosures spiked by 49%, which may indicate significant underlying cash flow pressure as small builders prioritise operational costs over tax obligations. It can also suggest the importance of diesel prices in the construction sector.

Logistics: Company insolvencies remain 3.7 times higher than 2022 levels, while business insolvencies increased 27% YoY in 2026 Q1. Large logistics operators are increasingly leaning into trade credit (+26% YoY) to manage immediate liquidity and fuel price volatility. While ATO Tax Debt Disclosures were only up 11% YoY for the quarter, there was an observed late stage spike, with the number of new tax debt disclosures for transport & logistics businesses in the month of March up by 97.7% YoY.

"As observers of the credit market, we see rising tax debts as one of the key indicators of cash flow dynamics," concluded Walters. 

"While large businesses in logistics and construction are using trade credit to maintain momentum, it seems many smaller players are avoiding new debt entirely, with new company formations in construction falling 53% YoY this quarter as the sector enters a period of consolidation."

* NAB Business Survey, Feb-2026.

Chart 1: High-Risk SMEs Dominate Credit Shopping Activity (2023-2026)

Chart 2 and 3: Overall Business Credit Demand and SME Credit Demand 

Source: Equifax

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NOTE TO EDITORS
The Equifax Business Market Pulse measures the volume of credit applications for business loans, asset finance and trade credit that go through the Equifax Commercial Bureau by financial services credit providers in Australia. Based on this, it is considered to be a good measure of intentions to acquire credit by businesses. This differs from other market measures published by the RBA/ABS, which measure new and cumulative dollar amounts that are actually approved by financial institutions. 

Equifax may quote publicly available data and known information from reputable sources (such as, but not limited to, ABS, ASBFEO, MYOB) in the Market Pulse to provide greater context on the market conditions surrounding Equifax observed credit trends. Unique enquiries refer to the first enquiry made by an entity, while ‘credit shopping’ is defined as two or more subsequent enquiries for the same product made to multiple lenders within 30 days.

DISCLAIMER
Purpose of Equifax media releases:
The information in this release does not constitute legal, accounting or other professional financial advice. The information may change, and Equifax does not guarantee its currency or accuracy. To the extent permitted by law, Equifax specifically excludes all liability or responsibility for any loss or damage arising out of reliance on information in this release and the data in this report, including any consequential or indirect loss, loss of profit, loss of revenue or loss of business opportunity.