Demand for business credit recovers as restrictions lift in NSW

by Micah Guiao22 Oct 2021

Following the success of NSW’s reopening after its 15-week lockdown, the demand for business credit is expected to rise in more states as they ease their way out of government-imposed restrictions.

Data from the first four days of NSW’s reopening recorded a jump in demand across all credit categories, according to the latest Equifax Quarterly Business Credit Demand Index. Inquiries for asset finance rose 25.1%, trade credit 15.5% and business loans 2.5% from Oct. 11-14 compared to the week prior

Scott Mason, general manager for commercial and property services at Equifax, said the economy has learned to adapt to the lockdowns better this time around.

“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,” Mason said. “It seems we’re all getting better at coping with lockdowns, which might help to hasten our economic recovery once businesses fully reopen.”

Total business credit applications bumped up to 13.7% in the September quarter compared to the same period last year – the uptick driven by the strong performance of business loan applications.

All states but the Northern Territory saw an increase in business credit and loan applications, with the highest recorded in Victoria and Queensland. The demand for business loans in the construction sector was also higher than it has been in the past two years.

“Equifax data shows that it’s small businesses of less than 20 employees that are particularly active in applying for business loans,” Mason said. “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.”

Meanwhile, asset finance applications are varied depending on how lockdowns have affected states. For example, applications in Victoria went up 40% compared to last year, but it went down 30% compared to the last quarter because of the numerous lockdown extensions.

Applications went up the most in states that did not experience prolonged lockdowns such as the Northern Territory and Tasmania.

On the other hand, trade credit applications edged up at an 0.8% increase compared to the same period last year, with the highest demand recorded in Western Australia and Queensland.