Business credit demand managed to recover to pre-pandemic levels, driven by the upswing in the demand for asset financing, according to the latest Equifax Quarterly Business Credit Demand Index.
The report shows solid commercial demand over the first quarter of the year, with overall business credit going back to the same level last year before the pandemic border closures and lockdown measures were implemented.
Credit information requests for asset finance increased by 8.9% over the quarter, boosting the credit activity for the quarter.
Scott Mason, general manager for commercial and property services at Equifax, said the increase in the demand for asset finance reflects the improvement in business sentiment.
"To see a rise in asset finance demand is a good sign for the economy demonstrating that businesses are starting to once again spend on replacement and renewal of equipment," he said.
Auto finance lenders reported the highest growth rate in asset finance activity at 25%. Asset finance enquiry for the construction industry also increased, up by 10%.
"The construction industry is a big user of asset finance, and this is the second quarter in a row when applications have risen as the industry seeks to scale and grow," Mason said.
The gains in asset finance offset the decline in business loan applications, which went down by 2% over the quarter. Still, business loan applications rose in Victoria, reaching the same level as Queensland and overtaking NSW.
However, the biggest drop was in trade credit, which declined by 7% compared to the previous year.
Insolvencies have also yet to make a comeback, but the volume was steadily rising.
“We expect it won’t be long before insolvency volumes return to their historical norms, particularly with JobKeeper now removed. Equifax analysis shows that corporate insolvencies are likely to dramatically increase over the next twelve months, with particular risk across deferral and hardship populations,” Mason said.