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Equifax’s September Business Market Pulse found demand for asset finance fell 3.2 per cent year on year, a marked improvement on the 12.7 per cent decline recorded in August.
The improvement was not uniform across the market, however, with demand among large businesses falling 8.3 per cent year on year, compared with a 2.5 per cent decline among small and medium-sized enterprises (SME).
The state-by-state figures revealed a similarly mixed picture. SME asset finance demand was flat in NSW, while it fell 0.5 per cent in Victoria, 6.9 per cent in Queensland, 2.4 per cent in South Australia and 6.8 per cent in Western Australia.
Among large businesses, asset finance demand fell 2.1 per cent in NSW and 2.3 per cent in Victoria but recorded steeper declines in Queensland (17 per cent), South Australia (24.6 per cent) and Western Australia (24.7 per cent).
Brad Walters, general manager of commercial at Equifax, said the latest figures suggested businesses were beginning to return to equipment spending after putting capital expenditure on hold.
“After a freeze on capital spending mid-year, the September Equifax Business Market Pulse shows early signs that Australian businesses are cautiously stepping back into equipment replacement,” he said.
“While businesses don’t appear to be back in full expansion mode, the freeze looks to be thawing. Business operators who have been delaying asset upgrades may only be able to stretch old equipment so far before maintenance costs and operational downtime outweigh replacement.”
Business loan demand rises across sectors
While asset finance demand remained below year-earlier levels, business loan demand increased across all five sectors tracked by Equifax.
The production sector recorded a 10.8 per cent annual rise in business loan demand, followed by housing and utilities at 12.6 per cent, public services at 12.4 per cent, lifestyle at 9.5 per cent and services at 7.1 per cent.
Asset finance demand remained in decline across each sector, although the scale of the falls varied. Housing and utilities recorded the smallest decline, at 1.3 per cent, while demand in public services fell 8.7 per cent.
Walters said the increase in business loan demand pointed to a growing need for working capital, particularly among businesses managing rising costs and tight cash flow.
“From what we can see, this contraction isn’t necessarily a sign that corporate Australia has suddenly lost borrowing ambition; rather, it follows elevated activity in the prior month and may be influenced by some funders looking to tighten their commercial lending in the face of an uncertain market.”
Indeed, brokers speaking to Broker Daily have noted how the economic climate is reshaping the challenges facing SMEs and the credit solutions they are turning to.
Walters said: “On the ground, however, small and medium businesses are actively taking on working capital loans to cover everyday expenses, rising overheads and tight cash flow.”
Construction and transport offered two examples of the shift.
In construction, SME business loan demand rose 13.6 per cent year on year, while asset finance demand fell 1.6 per cent. Across the sector as a whole, business loan demand increased 12.2 per cent, while asset finance demand declined 2.7 per cent.
Walters said: “Faced with persistent overheads, material costs and trade payment delays, smaller builders are securing cash lines likely to help keep current projects moving and protect immediate balance sheet liquidity, rather than buying new heavy machinery.”
Transport, postal and warehousing recorded a similar divide. Business loan demand across the sector rose 13.7 per cent, while asset finance demand fell 1 per cent.
Among large transport operators, business loan demand surged 33.2 per cent, even as asset finance demand fell 16.6 per cent.
SMEs and large businesses diverge
The national figures revealed a clear divide between business sizes, with SMEs continuing to drive business loan demand while larger businesses recorded declines in both business lending and asset finance.
Nationally, SME business loan demand rose 14 per cent year on year, compared with an 11.4 per cent fall among large businesses. SME asset finance demand declined 2.5 per cent, while demand among large businesses fell 8.3 per cent.
The divergence was evident across the states. SME business loan demand rose 14.4 per cent in NSW, 9.6 per cent in Victoria, 16.1 per cent in Queensland, 26 per cent in South Australia and 11.7 per cent in Western Australia.
Large business loan demand fell in every state covered by the report, including a 16 per cent decline in NSW and a 16.3 per cent fall in South Australia.
The figures also point to growing pressure on business cash flow. Equifax found 90.2 per cent of invoices were paid on time in August, unchanged from July. However, the share paid between one and 30 days late rose from 6 per cent to 7.9 per cent.
Walters said the increase in early arrears was worth watching as businesses increasingly used finance to manage day-to-day expenses.
“Underpinning all of this is a subtle shift in cash flow hygiene. While 90.2 per cent of invoices were paid on time in August, early arrears, invoices overdue by 1 to 30 days, crept up to 7.9 per cent, compared to 6 per cent in July.
“In an environment where borrowing is increasingly used for operational breathing room, it appears that businesses are starting to stretch supplier payment terms by a week or two to hold onto cash. Keeping an eye on these early payment delays will be critical as we head into the final quarter of the year.”
Business confidence takes a hit
NAB’s Business Survey, which has tracked confidence and conditions for more than 20 years, found that high interest rates, global uncertainty and fuel costs were pushing business confidence levels down to near-historic levels, with conditions well below average as well.
Economic stress from higher interest rates and rising costs has impacted businesses’ margins, while Australian Taxation Office debt enforcement and regulatory changes such as Payday Super have also put pressure on cash flow.
In May, fellow credit bureau CreditorWatch found payment arrears had climbed to their highest level since January 2020.
This has been feeding through to business owners, with business-related personal insolvencies increasing 14.4 per cent in FY2025–26, reaching 4,046 cases, according to the Australian Financial Security Authority.
Business credit demand has remained robust despite the bleak overall picture, however.
A report published by the Australian Banking Association (ABA) found 40 per cent of small and medium-sized businesses sought finance from their bank, while credit provided by banks reached a record $750 billion in April 2026, up from $567 billion in April 2023.
Banks such as the CBA, ANZ, NAB, and Judo Bank have also recorded strong growth in their business lending books.
This strong competition, both from banks and non-banks has also pushed the margin on small business loans above the cash rate to a five-year low, the ABA found.
[Related: How Payday Super could trigger ‘structural shift’ in SME lending]
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