Australia’s largest equipment finance aggregator delivered a profit increase for the year to June 2026, but the growth came entirely from its salary packaging arm. The broking and aggregation segment that connects independent brokers to lenders saw revenue barely move and earnings stay flat.
Meanwhile, bad debt provisions across the lending book jumped from 1.8% to 2.5% of the portfolio. Within the direct lending segment, provisions climbed to 8.2% from 5.8% twelve months earlier, and loans sitting more than 90 days overdue rose from $4.81 million to $8.19 million.
The pattern mirrors what mortgage and asset finance brokers have been reporting for months: businesses are still buying vehicles and equipment, but more of them are struggling to make repayments on time once the deal settles.
Where the revenue actually came from
The aggregator’s salary packaging division, which handles novated leasing for employees, posted sharp revenue and earnings growth. An acquisition completed in September 2025 added scale, and demand continued climbing thanks to the fringe benefits tax exemption for electric vehicles.
Broking and aggregation revenue, by contrast, grew only modestly. Earnings in that segment were essentially unchanged year on year. Market activity softened through April and May before rebounding in June, reflecting the stop-start confidence cycle that has defined SME borrowing over the past eighteen months.
Brokers added ten new lenders to the aggregator’s panel during the year, taking the total to 64. Cash flow lending and secured lending volumes surged 190%, a sign brokers are moving beyond traditional asset finance into working capital and invoice facilities to diversify revenue.
The catch
Broader product menus and bigger lender panels help brokers close more deals, but they don’t insulate the channel from credit deterioration once loans are live. The jump in arrears and provisions happened despite ongoing settlement growth, meaning the problem isn’t deal flow, it’s repayment stress building in existing books.
What’s driving the credit pressure
The aggregator attributed the rise in expected credit loss provisions to elevated macroeconomic uncertainty. That’s accurate but vague. The mechanics beneath it: SME operating costs have climbed faster than revenue growth for many businesses over the past two years, compressing margins and leaving less room to absorb a missed invoice or delayed payment.
Transport and construction remain the two largest sectors for equipment finance, and both have faced diesel price volatility, wage cost increases, and project delays. When a trucking business finances a new prime mover or a civil contractor leases excavators, the repayment capacity assumptions baked into the deal at origination can break down quickly if fuel costs spike or a major contract gets pushed back three months.
The aggregator also runs a small direct lending book through subsidiaries. One of those books is in runoff, and another reduced lending volumes during the year. Combined with the higher provisions, that segment’s earnings contribution fell.
Who carries the risk when arrears climb
In an aggregation model, the lender on the panel typically holds the credit risk, not the aggregator. But aggregators do hold some residual risk through equity stakes in broker businesses, through any loans originated by their own lending subsidiaries, and through reputational pressure if arrears become a pattern across deals they facilitated.
The 8.2% provision rate in the direct lending book is material. For context, major bank provision rates on SME lending portfolios sit between 0.5% and 1.5% depending on sector mix. Equipment finance provisions run higher because the collateral depreciates faster and liquidation values are less predictable than residential property, but 8.2% suggests the aggregator is either holding a riskier portfolio mix or marking down recovery expectations.
Brokers using non-bank lenders have reported tighter credit policies over the past six months, particularly for transport and construction deals. Lenders are requiring larger deposits, shortening terms, and declining applications that would have been approved eighteen months ago.
Trade-offs in a tougher underwriting environment
When lenders tighten, brokers face a choice: walk deals they know are marginal, or shop them across a wider panel hoping a non-bank or specialist funder will price the risk differently. The 190% jump in cash flow and secured lending volumes suggests many brokers are choosing the second path, moving clients into facilities that rely less on asset collateral and more on revenue-based structures.
That diversification increases commission revenue and helps clients access capital when traditional asset finance isn’t available. The downside: those structures often carry higher rates, shorter terms, and covenants that trip faster if trading conditions deteriorate. If a client funded through a revenue-based facility hits trouble, the arrears show up quicker and recovery is harder.
Base case and pressure scenarios
Base case over the next twelve months: equipment finance settlement volumes hold steady as businesses continue replacing essential vehicles and machinery, but arrears drift higher as more borrowers hit cashflow pressure. Provisions stabilise around current levels unless a sector-specific shock (construction insolvencies, transport cost spike) pushes them higher.
Upside scenario: interest rate cuts in late 2026 or early 2027 ease debt servicing costs for SMEs, reducing rollover risk and slowing the pace of new arrears. Lenders cautiously expand credit appetite as macro uncertainty fades.
Downside scenario: a sharp contraction in construction activity or a diesel price shock pushes more transport and civil businesses into arrears simultaneously. Lenders pull back further, and brokers face a choice between lower volumes or higher bad debt exposure if they keep writing deals at the margin.
What happens if provisions keep climbing
If the trend continues, lenders will either reprice risk higher (lifting rates on new equipment finance deals) or narrow lending criteria further. Both outcomes shrink the pool of businesses that can access finance, which eventually shows up as lower broker settlement volumes.
For aggregators with direct lending exposure, rising provisions eat into earnings and may force capital injections or book sales. The aggregator’s management described the provisioning increase as prudent rather than reactive, but that framing only holds if arrears plateau from here.
Practical take for brokers and SME borrowers
If you’re a broker writing equipment finance deals today, pressure-test repayment capacity assumptions harder than you did two years ago. Ask clients about their pipeline for the next six months, not just the current quarter. If a deal sits at the edge of a lender’s risk appetite, consider whether the client can handle a rate rise or revenue dip without missing payments.
If you’re an SME considering equipment finance, build a cashflow buffer into your assumptions. The gap between what you can technically service and what you can comfortably service is where arrears risk lives. If the business case for new equipment relies on revenue growing 15% next year, model what happens if it only grows 5%.
For a broader look at where broker-channel credit is moving, see our analysis of non-bank lending diversification.
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General info, not financial advice.
