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The latest Equifax Business Market Pulse found overall business credit demand lifted 3.5 per cent year on year (YoY) in March 2026, rebounding from the flatter conditions seen in February.
However, that growth was overwhelmingly driven by large businesses, which recorded a 5.9 per cent YoY increase in credit inquiries, while SME demand moved in the opposite direction, falling 5.8 per cent over the same period.
Equifax described this divergence as an accelerating “two-speed economy” in business credit activity, with larger firms continuing to access funding, while smaller operators become increasingly defensive in their borrowing behaviour.
“We have been observing this two-speed economy between large and small business growth over the past few months. However, current global events are creating further domestic pressure that smaller operators appear to be far more sensitive to,” Brad Walters, general manager of commercial at Equifax, said.
“This cohort is likely feeling the cumulative weight of interest rate increases and persistent inflation more acutely. We can see this in sectors such as Manufacturing, where SME demand fell -12.5 per cent YoY while their larger counterparts only saw a smaller reduction (-1.4 per cent YoY) in March 2026.”
Logistics sector showing signs of stress
Among the major industries tracked in the March data, logistics produced some of the clearest indicators that SMEs are shifting away from growth borrowing and towards short-term operational survival.
Overall credit demand in the logistics sector declined 4.2 per cent YoY, while business loan demand dropped 11.6 per cent.
At the same time, trade credit inquiry volumes surged 16 per cent YoY – the highest growth in trade credit among all major sectors measured by Equifax.
Within the SME segment, the same pattern was even more pronounced.
Overall SME logistics credit demand fell 10.1 per cent YoY, driven primarily by a 16.8 per cent reduction in business loan demand. Yet SME trade credit demand rose 12 per cent nationally, with combined trade credit growth across NSW, Queensland, and Victoria increasing 31 per cent YoY in March.
Equifax said the shift indicated smaller logistics operators are increasingly relying on short-term unsecured credit facilities to manage day-to-day cash flow as fuel prices rise and supply chain conditions remain volatile, rather than seeking longer-term lending for expansion.
“The Logistics sector, in particular, is signalling significant emerging challenges. While business loan demand dropped by -11.6 per cent YoY, trade credit surged by +16 per cent YoY. Given the market conditions, this does not appear to be a sign of expansion; rather, it could indicate that new investments are being put on hold as operators leverage unsecured credit lines to buffer rising fuel costs and supply chain shocks,” Walters said.
Asset finance demand in logistics also continued its recent upward trajectory, rising 4.4 per cent YoY overall, while SME borrowers in NSW and Western Australia posted stronger demand for vehicle finance as businesses moved to offset higher petrol and diesel costs.
Equifax noted this reflected businesses bringing forward vehicle purchases, including EV transitions, in an effort to reduce operating expenses.
SME caution broadens beyond logistics
The weakening in SME credit demand was not confined to transport operators.
Retail trade SME demand fell 11.2 per cent YoY in March as inquiries across all three commercial credit products moved lower.
Manufacturing SME demand contracted 12.5 per cent, with lower inquiries recorded for asset finance, business loans, and trade credit.
Across the SME market nationally (YoY):
- Overall business credit demand dropped 5.8 per cent.
- Asset finance demand declined 4.4 per cent.
- Business loan demand fell 4.9 per cent.
- Trade credit demand dropped 12.1 per cent.
A new report from another SME lender, Banjo Loans, also found that loan applications through the non-bank fell 28 per cent in the March quarter and are now down 22 per cent compared to a year earlier.
Tax debt defaults rise sharply
As SME borrowing appetite weakens, Equifax data also found that business arrears with the Australian Taxation Office (ATO) are rising rapidly.
New ATO tax debt disclosures across the total market increased 37.8 per cent YoY in March 2026, marking the third consecutive month of annual increases in new tax defaults.
Although ATO debt removals also increased, Equifax said the volume of new disclosures continued to outpace removals, resulting in a higher net number of companies carrying active ATO defaults nationally.
The logistics sector was again one of the hardest hit, with new ATO tax debt disclosures rising 97.7 per cent YoY in March.
Construction also recorded a 78.9 per cent increase in new disclosures.
According to Equifax, the rapid rise in tax debt is occurring while company insolvencies remain elevated and business-related personal insolvencies continue to trend upwards.
Company insolvencies totalled 1,191 in March, while business-related personal insolvencies in February rose 17 per cent YoY.
“Most notably, we are seeing a major lift in tax debt, with the volume of new ATO disclosures rising +37.8 per cent YoY in March. At the same time, Company Insolvencies are flattening at peak levels, while business-related personal insolvencies continue to rise,” Walters said.
“It is this surge in tax defaults that often serves as a precursor to broader insolvency. Historically, this volume of ATO debt flows through to business proprietors and directors’ personal estates, leading to a rise in business-related personal insolvencies.”
[Related: How tougher business conditions are reshaping the broker role]
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