Non-bank lenders are ramping up court action over insolvencies as the major banks step back, a new report reads.
The report from business rescue firm Jirsch Sutherland notes that insolvency pressure nationwide also remains high.
It says this trend shows that company directors need to be cautious when considering non-bank sources of funding.
A new credit risk report from Alares shows that non-bank lenders took court action since 2019 to record or near-record levels; their actions accelerated in 2023 and 2024 and remained high last year.
The Alares report also shows that court action by the big four banks peaked in 2024 and eased in 2025.
“From an insolvency perspective, enforcement pressure hasn’t fallen – it shifted,” says Andrew Spring, a partner at Jirsch Sutherland.
“While the (Australian Tax Office) ATO remains the dominant source of court action, non-bank lenders are accounting for an increasing share of insolvency-related enforcement as the major banks step back.”
Alares report findings:
• Insolvencies rose from 30,000 businesses for most 2025 to more than 32,000.
• ATO court recoveries are still well above historical levels.
• Direct ATO court action against companies and individuals is rising even as personal bankruptcy sequestrations remain relatively subdued.
CHANGE OF LENDERS
Spring says that as banks pull back from small and medium-sized enterprise (SME) lending, more businesses are turning to non-bank lenders.
“With credit tightening and risk appetite shrinking, traditional finance is getting harder to secure, pushing many SMEs toward alternative funding at a time when they can least afford it,” he says.
The spike in court action comes at a time of growing insolvencies, the company says: after a dip in November 2025, insolvencies rose in December as year-on-year numbers surpassed 2024 levels.
On an annual basis, insolvencies have been growing since the COVID pandemic, it says.
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