Recovery is imminent for business credit demand despite it easing in the third quarter of 2021 as states move out of lockdown.
At a glance:
– Asset finance applications rose by 8.5 per cent (vs Q3 2020)
– Business loan applications grew by 22 per cent (vs Q3 2020)
– Overall business credit applications increased by 13.7 per cent (vs Q3 2020)
Data released from global data, analytics and technology company Equifax in their Quarterly Business Credit Demand Index for September 2021 reveals that there was a jump in demand across all categories of credit during the first four days of NSW reopening after 15-weeks in lockdown.
Asset finance enquiries increased by 25.1 per cent, trade credit by 15.5 per cent and business loans by 2.5 per cent in the week of 11-14 October compared to the previous week in lockdown.
Indicators from Equifax’s index strongly suggest a bounce-back as NSW and Victoria continue to ease restrictions.
Business credit applications went up by 13.7 per cent in the September 2021 quarter when compared to the same quarter the previous year. The driving factor of this figure was due to the increase in business loan applications, which rose by 22.0 per cent compared to Q3 2020 and by 7 per cent compared to Q3 2019, which was pre-COVID.
The construction sector saw demand for business loans increase higher than it had been for two consecutive years (Q3 2019 and 2020).
As aforementioned, asset finance applications increased by 8.5 per cent in the third quarter of 2021 compared to the same period in 2020, however, this was not uniform across Australia. The states without lockdown saw an increase in asset finance enquiries compared to those that did enter lockdown. NSW saw applications drop by 9.0 per cent in Q3 2021 compared to 2020. When comparing this to the previous quarter (Q2 2021) when there was no lockdown, enquiries dropped by as much as 35 per cent.
The news isn’t so dire for asset finance. Four days out of lockdown saw a rise in asset finance enquiries by 25.1 per cent. It’s a promising figure as it may be a sign that asset finance will turn around in the formerly locked-down states as dealerships reopen and the demand for equipment, machinery and vehicles normalise.
“There’s no doubt that the lockdowns of this last quarter have hurt business credit demand, but the impact is less than we saw during last year’s lockdown. It seems we’re all getting better at coping with lockdowns, which might help to hasten our economic recovery once businesses fully reopen,” said Scott Mason, the General Manager Commercial and Property Services at Equifax.
“Equifax data shows that it’s small businesses of less than 20 employees that are particularly active in applying for business loans.
“We’ve also noticed a trend for businesses to turn to non-bank lenders for funding. This could indicate these smaller lenders are less risk-averse, or that their business loan products and turnaround times are advantageous.”
See yearly changes as a percentage to asset finance applications and business loan applications in the tables below.
Table 1: Asset finance applications change 2021 VS 2020
Table 2: Business loan applications change 2021 VS 2020