Trade credit debt is almost as high as bank debt among people entering business related personal insolvency, the Australian Financial Security Authority reports.
AFSA found that in September, people in business who entered into a personal insolvency owed 35 per cent of their debts to banks and 32 per cent to businesses, sole traders or individuals.
The gap between the two sources of credit has narrowed this year.
AFSA said: “This is significant because bank debt is frequently secured, whereas trade credit is often not, increasing the risks for businesses, sole traders or individuals who provide goods or services on credit.”
“Businesses and sole traders are just as exposed as banks,” it said.
The most exposed businesses include professional services firms, such as lawyers and accountants, internet companies, marketing and communications businesses, leasing companies, real estate agents and landlords.
AFSA deputy chief executive Gavin McCosker said it was important for businesses to consider their risks and how to protect themselves.
McCosker said trade creditors should consider whether to use the Personal Property Securities Register to strengthen their legal rights.
Credit bureau CreditorWatch reported that the number of businesses entering into administration rose for the first time since June, up 11 per cent in September.
CreditorWatch said the number of business defaults rose 23 per cent in September – the first increase since May.
It said the increases may be an indication that changes to JobKeeper arrangements are having an impact.
The biggest increases in administrations were in Victoria and Queensland.