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Non-bank lenders ramp up court enforcement as major banks retreat, new data reveals

Jirsch Sutherland

Key Facts:

• Non-bank lenders are increasing court enforcement actions to record levels while major banks reduce their activity, particularly through 2023-2025
• Overall insolvency rates continue to rise, with numbers in December 2025 exceeding 2024 levels and showing consistent upward trend since COVID
• The ATO remains the primary source of court actions, with continued high levels of recovery efforts against companies and individuals
• Over 32,000 businesses faced insolvency-related activity in late 2025, up from around 30,000 earlier in the year
• Major banks are focusing on low-risk lending, forcing SMEs towards non-bank lenders 

Media release

16 January 2026

 

Non-bank lenders ramp up court enforcement as major banks retreat,

new data reveals

 

Insolvency pressure across Australia remains elevated, with non-bank lenders now driving a growing share of court-based enforcement as major banks pull back, new data shows. This prompts insolvency solutions and business rescue firm Jirsch Sutherland to urge company directors to take a cautious, well advised approach when considering non-bank funding.

 

The latest Alares Credit Risk Insights report shows non-bank lenders have steadily increased court actions since 2019 and are now at record or near-record levels. The increase accelerated through 2023 and 2024 and has remained elevated into 2025. In contrast, court actions by the big four banks peaked in 2024 and eased in 2025, highlighting a clear divergence in creditor behaviour.

 

“From an insolvency perspective, enforcement pressure hasn’t fallen – it has shifted,” says Andrew Spring, Partner at Jirsch Sutherland. “While the 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.

 

“As banks pull back on 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.” 

 

The enforcement shift is occurring against a backdrop of sustained insolvency growth. After a brief dip in November 2025, insolvencies rose again in December, with year-on-year numbers once again exceeding 2024 levels. On an annual basis, insolvencies have followed a consistent upward trend since the COVID era lows.

 

The Alares Credit Risk Insights report also shows:

• Overall insolvency-related activity increased from around 30,000 businesses for much of 2025 to more than 32,000 businesses
• ATO court recoveries continue to track well above historical levels
• Direct ATO court action against companies and individuals continues to rise, even as personal bankruptcy sequestrations remain relatively subdued

 

Patrick Schweizer, Director of Alares, says the divergence in court activity reflects a structural shift in lending behaviour since COVID. “After COVID, both the big four banks and non-bank lenders steadily increased their court recoveries,” he says. “However, the big banks did a U-turn in 2025 and started decreasing their court activity, whereas non-bank lenders continued to increase at an even higher rate.”

 

Schweizer says the trend is likely linked to changes in where credit risk is being written.

“Speculating on cause and effect is always difficult, but I suspect the big four are now heavily focused on very low-risk lending, particularly residential mortgages and blue-chip corporates,” he says. “This is pushing SMEs and borrowers with less-than-perfect credit histories towards second, third and fourth-tier lenders. There has also been a relative explosion in new private lending over the past couple of years.”

 

Spring says the data reinforces the need for directors to fully understand the risks associated with non-bank finance. “Non-bank funding can play an important role in certain situations, but it often comes with higher costs, tighter covenants and faster enforcement triggers.

 

“Easy access to non-bank lending and low-doc finance doesn’t remove a director’s responsibility to act prudently. Before taking on more debt, directors need to stop, look in the mirror and be confident the decision won’t compromise the business’s long-term viability. Directors also need to understand how quickly conditions can escalate if trading deteriorates, and why early advice is critical.”

 

About us:

About Jirsch Sutherland – jirschsutherland.com.au

Established in 1984, Jirsch Sutherland is one of Australia’s leading national independent insolvency specialists, and is the country’s leading voluntary insolvency firm. The Jirsch Sutherland team works closely with small and mid-size accounting, finance and legal firms – and their clients – to provide a wide range of expert corporate and personal insolvency services including liquidations, voluntary administrations, receiverships and bankruptcy. 

 With head offices in Sydney, Melbourne, Brisbane, Newcastle and Perth, supported by a network of regional offices, Jirsch Sutherland’s national reach combined with a local presence underpins the company’s ongoing success. For over three decades, Jirsch Sutherland has earned a well-deserved reputation for protecting and guiding clients through the insolvency process in a fair and ethical way.

 In Western Australia, Jirsch Sutherland trades as WA Insolvency Solutions (WAIS).

 

Contact details:

Lisa Llewellyn
Llewellyn Communications

[email protected]  |  0419 401 362