Australian businesses are focused on preserving cash flow over long-term capital investment, according to the latest Equifax Business Market Pulse, which shows a clear divergence between loan and asset finance demand in July.
National demand for business loans rose 6.2% year-on-year in July, a notable improvement on June's 3.8% growth. At the same time, demand for asset finance fell 9.1% year-on-year, extending a pullback in capital expenditure that has been building since May.
Large business asset finance demand turned negative for the first time since October 2025, down 4.8% year-on-year, while SME asset finance fell more sharply still, down 12.6% nationally.
The pullback in capital spending tracks with weaker business sentiment more broadly. NAB's Q2 2026 Quarterly Business Survey recorded a 13-point drop in business confidence, with capital expenditure plans for the next 12 months falling 8 points as firms turned more cautious.
Brad Walters (pictured), general manager of commercial at Equifax, said the data points to businesses shoring up cash flow rather than committing to major purchases.
"It's clear that Australian businesses are actively securing borrowing lines to manage operational liquidity, while putting a firm halt on major capital investments at this time," Walters said.
The services sector illustrated this trend most clearly, with business loan enquiries surging 21.7% year-on-year overall, driven by strong demand from both large businesses (up 27.1%) and SMEs (up 18%). Asset finance demand in the same sector fell 12.6% overall and 21.2% among SMEs. The pullback was even sharper in weaker-performing sectors: Public sector and housing & utilities businesses saw declines across both loans and asset finance, with housing & utilities SME asset finance down 20.3% year-on-year.
"Following the cash preservation strategies we observed in June, smaller businesses appear to be prioritising immediate operational runway over fleet, machinery, or equipment upgrades," Walters said.
Business repayment behaviour remained broadly healthy in June, with 85.9% of debt paid on time and early payments climbing to 11.6%. Medium (31-60 day) and late (61-90 day) payment categories stayed largely flat, at 1% and 0.3% respectively, while severe delinquencies of 91 days or more edged up to 1.1%, from 0.6% in May. Company adverse rates fell 6.1% year-on-year, and company and director-related entity adverse rates fell 6.7%.
Consumer-facing sectors showed a split response to rising overheads, particularly elevated labour and purchase costs. Within the Lifestyle sector, retail trade pulled back on credit exposure (down 17.6% YoY in SME asset finance), while accommodation & food services businesses took on more business loans (up 2.6% YoY for SMEs) to support cash flow while pausing capital spending.
"We're seeing a split in how businesses are responding: retail and arts businesses are cutting overheads by limiting debt exposure, while cashflow-sensitive hospitality businesses are taking on business loans likely to help maintain liquidity," Walters said.
NSW led loan demand across both large and SME businesses, up 15.5% and 15.3% respectively, while Victoria's credit appetite remained flat to negative across the board.
Walters said this pattern should be read positively against the weaker consumer credit backdrop: unlike consumer credit, which is experiencing deeply declining demand rates, "we should view this commercial credit activity and overall business resilience as a genuine positive for Australian businesses given overall macro conditions."
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