According to the report, high-risk SMEs—those with credit scores between 301 and 600—are engaging in credit shopping at a rate 2.9 times higher than their low-risk counterparts. This surge comes amidst a marginal overall decrease in business credit demand, which fell by 0.4% year-on-year. Notably, SME credit demand contracted by 7% during the same period.
Brad Walters, General Manager of Commercial at Equifax, highlighted that this behaviour reflects the challenges faced by sub-prime businesses in securing necessary funding. The increased credit shopping activity may also point to tightening lending conditions, as some firms report difficulties in obtaining finance.
For SMEs, this environment underscores the importance of maintaining strong credit profiles and exploring diverse financing options. Businesses should consider consulting with financial advisors to identify suitable funding solutions and to develop strategies that enhance their creditworthiness, thereby improving their chances of securing favourable loan terms.
Additionally, lenders and financial institutions may need to reassess their risk assessment frameworks to accommodate the evolving needs of SMEs, ensuring that viable businesses have access to the credit necessary for growth and sustainability.
Please Note: If this information affects you or is relevant to your circumstances, seek advice from a licensed professional.
