Small businesses are quietly hitting the brakes, and it’s showing up in two places at once: their equipment sheds and their mortgage statements.
That’s the picture painted by Equifax’s latest Business Market Pulse for June, which tracks how Australian businesses are borrowing, spending and paying their bills. And the headline finding is that the fast, borrow-heavy conditions of late last year have cooled off, but not evenly.
“The June Equifax Business Market Pulse shows that the rapid pace of business credit growth we saw late last year has cooled. National business loan demand is trailing the 12-month average at +3.8% year-on-year,” said Brad Walters, General Manager of Commercial at Equifax. “After a period of heavy borrowing, possibly to keep up with inflation and rising costs, Australian businesses now appear to be moving into a much more cautious, conservative phase.”
A two-speed economy
Fair enough, on its own that just sounds like things settling down. But look closer and the “settling down” is really two very different stories happening under one roof.
“Look under the surface and you see a clear and continuing multi-speed economy. Large enterprises still have the financial runway to borrow and expand, with loan demand up +7.8% year-on-year. Meanwhile, small businesses have pulled back. National SME loan demand flatlined being only +0.5% year-on-year, and their asset finance applications dropped by -5.6% year-on-year,” Walters said. “Small business owners are actively halting upgrades to machinery and vehicles possibly to protect immediate cash reserves.”
That gap shows up most sharply in services, a sector packed with small operators, from accounting firms to marketing agencies to professional consultancies.
“In the Services Sector, large service-based businesses are continuing to upgrade, with asset finance demand increasing by +17.1% year-on-year. Meanwhile, small businesses in the sector have pulled back completely, with asset finance plunging by -13.7% year-on-year,” Walters said. “It’s likely that while big players are scaling up, possibly to capture market share, small services firms are halting new investments.”
Bills are taking longer
Equifax’s data shows this caution isn’t just about which loans businesses apply for, it’s changing when they pay their suppliers too. Long-term, severe defaults have held steady at around 8% since May, but debts sitting 31 to 60 days overdue have been climbing steadily since March, and now make up 10% of all commercial debt in Australia.
“We’ve also been observing what looks like cash preservation starting to cause bottlenecks in day-to-day payment times,” Walters said. “Given the economic environment, this may be a sign that businesses are intentionally taking a bit longer to pay their suppliers as a practical way to manage their weekly cash flow.”
In plain terms, if you’re a small supplier waiting on an invoice from another small business, this is likely part of why it’s taking a bit longer to land.
The pressure follows owners home
The most striking finding in the report isn’t about business accounts at all, it’s about what’s happening on small business owners’ own mortgages. Equifax found SME owners are running personal home loan delinquencies four basis points higher than the general public. They’re also carrying considerably bigger mortgages, averaging $585,000 compared to $379,000 for everyone else, nearly 50% more.
“Equifax data is also showing that the financial pressure facing small business owners has now followed them home,” Walters said. “This could be an indication that many small business owners are making tough choices, possibly delaying their own personal mortgage payments to keep their businesses running.”
Put together, the picture Equifax is describing isn’t a uniform slowdown. It’s large businesses continuing to invest and expand while smaller operators quietly conserve cash wherever they can, on equipment, on supplier payments, and in some cases, on their own household budgets.
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