Businesses are borrowing to stay alive, not grow. Brad Walters explains why July’s credit surge is actually a warning sign.
What’s happening: Business loan demand surged 6% in July 2025 compared to the same month last year, while 1362 companies entered insolvency: a 10% increase. Construction sector leads both categories, showing stress across the economy.
Why this matters: The credit surge represents survival borrowing rather than growth investment, with businesses seeking funds to maintain operations rather than enhance productivity, according to Equifax analysis of commercial credit trends.
Credit demand rises
Businesses seeking survival funding
Australian businesses increased their demand for commercial credit by 3.8% in July 2025 compared to July 2024, driven primarily by a 6% surge in business loan applications. However, the underlying motivation appears to be operational survival rather than expansion.
“In the face of ongoing market uncertainty, economic pressures and continued growth in insolvencies, we can see that many businesses are reaching out for credit often to maintain operations or invest in core offerings, rather than investing in productivity enhancing measures such as technology, training or hiring,” says Brad Walters, General Manager of Commercial at Equifax.
Year-to-date commercial credit demand has risen 2.14% compared to the same period in 2024, with business loans leading the charge while trade credit demand declined 7.3% year-on-year in July.
Asset finance demand increased by a more modest 2.7%, suggesting businesses are prioritising immediate operational needs over equipment and infrastructure investments.
Construction sector struggles
Leading insolvencies and payment delays
The construction industry dominates Australia’s insolvency statistics, with 341 companies failing in July alone representing the highest proportion across all sectors. This represents a 3.66% increase from July 2024.
Construction also leads in payment delays, with the highest average Days Beyond Terms at 7.57 days in June. This means construction businesses are paying suppliers more than a week late on average, nearly double the market average.
Following construction in the insolvency rankings, accommodation and food services recorded 226 failures in July, while retail recorded 91 insolvencies for the month.
The construction sector’s ongoing challenges align with broader insolvency trends, with the industry consistently showing stress indicators across multiple metrics.
Payment patterns improve overall
Despite sectoral challenges, overall payment behaviour showed improvement, with average Days Beyond Terms decreasing to 4.40 days in June down 9.6% from the previous year. The year-to-date average was 4.08 days, representing a 14.9% improvement.
Rental, hiring and real estate services followed construction with 7.48 average Days Beyond Terms, while retail trade and professional services showed more manageable delays of 3.45 and 3.5 days respectively.
Regional insolvency patterns
NSW leads failures
New South Wales recorded the highest number of insolvencies in July with 488 company failures, followed by Victoria with 410 and Queensland with 282.
Western Australia recorded 79 insolvencies, South Australia 66, while the territories showed smaller numbers: Tasmania (8), Northern Territory (10), and Australian Capital Territory (19).
The geographic distribution reflects population centres and economic activity, with the eastern seaboard bearing the brunt of business failures.
Earlier data showed insolvencies reaching five-year highs, indicating the July figures represent a continuation of concerning trends rather than an isolated spike.
The productivity challenge
Survival mode limits growth
The data reveals a fundamental challenge for Australia’s productivity agenda. Rather than borrowing to invest in growth-enhancing measures, businesses are increasingly seeking credit to maintain basic operations.
“Understanding the trends impacting businesses, including the appetite for and use of credit, is particularly important given the renewed focus from Government and industry bodies on boosting Australia’s productivity,” Walters explains.
The preference for business loans over trade credit suggests companies are moving away from supplier relationships and towards formal lending arrangements, potentially indicating cash flow pressures affecting supply chain dynamics.
Mixed signals ahead
While the overall decrease in payment delays suggests some improvement in business cash flow, Walters notes significant outliers remain, “with Construction and Rental, Hiring & Real Estate Services paying back dues almost twice as late as the market average.”
The 10% increase in July insolvencies, combined with survival-focused borrowing patterns, suggests Australian businesses face continued pressure despite some positive indicators in payment behaviour.
For policymakers focused on productivity growth, the data presents a challenge: how to support businesses moving from survival mode to growth investment in technology, training, and hiring.
Brad Walters is General Manager of Commercial at Equifax, which tracks commercial credit trends and business payment behaviour across Australia.
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