Big businesses getting bigger amid two-speed recovery
New data shows big businesses are increasingly seeking loans to fuel growth, while some companies are struggling just to keep the lights on.
Overall business loan demand rose 2.3 percent in the three months through December compared to the equivalent 2024 quarter, according to the latest Equifax Business Market Pulse report. Still, overall business demand is nine percent lower than four years ago, and companies’ ability and willingness to borrow heavily depends on their size, said Brad Walters, chief commercial officer at Equifax.
“While large-scale businesses are increasing their appetite for credit more quickly, SMEs (small and medium-sized enterprises) appear to be following a more stable upward path, balancing growth with external factors such as inflation pressures,” he said.
“They don’t always have the means to absorb potential shocks as easily as their larger rivals, so they opt for a steadier, more sustainable climb to the top.”
The difference was evident in many industries but was most pronounced in retail; An increase of 7.9 percent in the loan demand of large enterprises was recorded, compared to a constant increase of 0.7 percent in the loan demand of SMEs.
But even more surprising was the number of stores that had to close their doors.
“Whilst we are seeing strong demand growth among major retailers, the wider industry is still showing some signs of pressure, with the last quarter seeing a significant 64 per cent year-on-year increase in retail insolvencies,” Mr Walters said. he said.
Insolvencies in the hospitality sector remained high overall but fell nine per cent compared to the equivalent quarter in 2024, but organisations’ relative appetite for credit told a familiar story about growth prospects.
Demand for commercial credit from large hospitality groups rose by almost a fifth in the quarter, while overall credit growth from smaller players remained marginal.
Bankruptcies in the construction industry remained high and relatively unchanged; Credit data showed larger builders confidently purchasing materials for project pipelines, resulting in a 6.6 percent increase in commercial loans.
“Over the same period, small construction businesses appear to be avoiding large debts, seen with a slight decline in overall demand (-0.7 percent) and borrowing only for certain vehicles through asset financing (+4 percent).”
Both the Commonwealth Bank and Westpac said last week they expected demand for credit from businesses and households to remain resilient in 2026 despite the country moving into an interest rate rise cycle.
Earlier this month the central bank raised interest rates for the first time in two years, and economists believe further increases are possible this year, with the next one likely in May.
