New data show a sharp divide between large firms and SMEs
Large enterprises are driving credit demand growth, while small and medium-sized businesses continue a gradual recovery from inflation pressures, according to new Equifax data.
Business credit scores have reached their highest level in three years, driven primarily by increased borrowing activity from large enterprises, according to the latest Equifax Business Market Pulse report released on Monday.
Overall business credit demand increased 2.3% in the fourth quarter of 2025 compared with the same period in 2024, with business loan demand rising 4.1% year on year. However, trade credit demand decreased 4.9% over the same period.
The report reveals a multi-speed recovery across the Australian business sector, with large businesses leading credit demand growth while SMEs follow a steadier path to recovery.
Brad Walters, general manager of commercial at Equifax in Australia, said the figures suggest early signs of SME recovery despite the slower pace.
“The +4.5% year-on-year increase in SME demand in Q4 2025 is a positive signal - though it reflects a more measured recovery pace compared to larger enterprises,” Walters said.
“While large-scale businesses appear to be accelerating their credit appetite more quickly, SMEs appear to be navigating a steadier path upward as they balance growth with external factors such as the pressures of inflation.
"They don’t always have the means to absorb potential shocks as easily as their larger competitors, so they’re choosing a steadier, more sustainable climb back to the top.”
Path to recovery
Despite the recent growth, small business borrowing remains 9% below levels recorded in the first quarter of 2022, indicating the sector is still on a recovery pathway to pre-inflation levels.
Business loan quality increased by two points in the fourth quarter of 2025, reaching a three-year high. Walters attributed the improvement to a shift in the market mix, with more enquiries coming from larger businesses that typically maintain higher credit scores and stronger financial reserves.
He said: “When we look at the past quarter, it appears to be a story of a change in the market mix. We’ve seen more enquiries from larger businesses, which often have more reserves and carry higher credit scores.
"This shift in the overall enquiry profile - where the larger players are currently more credit active than smaller players - is what I see driving this upward trend in credit quality. In practical terms, this shows that the credit quality of the mid-market and larger businesses overall remains quite resilient."
The hospitality, construction and retail sectors showed the widest gaps between large business and SME credit activity during the quarter.
Large hospitality businesses drove significant demand increases across trade credit (19.4%), business loans (9.1%), and asset finance (5%), while SME credit demand growth in the sector was marginal at 1.9% year on year.
“The hospitality sector shows one of the widest discrepancies in overall demand for large businesses compared to SMEs in Q4 2025. While trade credit demand in large hospitality businesses increased by +19.4% year-on-year, overall credit demand growth from SMEs (+1.9% year-on-year) was marginal,” Walters said.
Strong demand growth
Hospitality insolvencies decreased 9% compared with the fourth quarter of 2024, while days beyond terms for trade payments reduced by 1.5 days over the same period.
In construction, large businesses drove a 6.6% year-on-year increase in trade credit demand, while small construction businesses showed a slight 0.7% reduction in overall demand, borrowing primarily for specific equipment through asset finance (4%).
Large retailers increased national demand by 7.9% year on year, compared with 0.7% for SMEs in the fourth quarter of 2025. Large New South Wales retailers were particularly active, increasing business loan enquiries by 25%.
However, the retail sector showed signs of pressure, with insolvencies increasing 64% year on year in the fourth quarter.
“While we have seen strong demand growth among large retailers, the wider sector still shows some signs of pressure, with the past quarter revealing a substantial +64% increase in retail insolvencies year-on-year,” Walters said.
The Equifax Business Market Pulse measures the volume of credit applications for business loans, asset finance, and trade credit processed through the Equifax Commercial Bureau by financial services credit providers in Australia.
