While demand in business credit bounced back in the fourth quarter of 2021, recent data from analysis firm Equifax reveals the upward trend may be slowing down.
The global data, analytics, and technology company – which measures the volume of credit applications for trade credit, business loans and asset finance – has released its quarterly business credit demand index for December 2021, which found demand across all categories of business credit (except asset finance) increased.
The report found, demand for business credit applications grew by 9.7 per cent in December 2021 (compared to Q4 2020), which was driven by a rise in business loan applications that saw a third straight quarter of growth.
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Over the year, business loan applications were up 19.6 per cent in Q4 2021 compared to the same quarter in 2020 (or 12 per cent compared to Q4 2019) with Victoria and Queensland leading the recovery.
Across the states, Victoria and Queensland saw the largest increase in business loan applications up 25 per cent, followed by NSW up 18 per cent. The ACT was up 21 per cent, South Australia saw a rise of 19 per cent, while Western Australia and the Northern Territory remained “relatively flat” up 2 per cent.
In particular, business loans in the accommodation and food services sector saw a “significant” rise, up 33 per cent on Q4 2020, while the retail trade sector also saw a rise in demand for business loans up 18 per cent, compared during the same period.
Commenting on the trends, general manager commercial and property services Scott Mason said the rise in business loan demand in the food service, accommodation and retail sectors suggests that business owners are looking to “re-enter these industries” or “revitalise existing businesses” post-pandemic.
Despite the overall upward trend, Equifax said the pace of growth had “eased in recent months” with the spike in omicron cases casting a shadow on the “prospect of continued commercial credit growth” into the first quarter of 2022.
Mr Mason said: “The impacts of the Omicron spike, including staff shortages and consumers’ self-imposed lockdown behaviors, may have a negative influence on the recovery of the hospitality and retail sectors.”
“We can’t consider ourselves out of the woods yet.
“The impacts from the Omicron variant were minimised due to seasonal low demand in December, but are likely to be seen in Q1 of this year.”
He said the first two weeks of January had already seen a sharp decline in commercial inquiries, although that decline seemed in line with “seasonal expectations”.
Asset finance applications took a dip
Applications for assets finance decreased 3.5 per cent in the December 2021 quarter compared to the same period in 2020.
The report said the decline in asset finance was possibly due to the impact of supply-chain pressures on the availability of equipment, machinery and vehicles.
Despite the overall drop, asset finance demand in NSW (down 2 per cent compared to Q4 2020) and Victoria (recording no change over the same period) was largely in line with previous years despite being impacted by lockdowns in Q3 2020.
This represents a “marked improvement” from the previous quarter, when asset finance demand decreased 22 per cent in NSW and 8 per cent in Victoria year-on-year.
Comparatively, Tasmania saw a rise in asset finance applications up 8 per cent in December 2021, compared to the previous year.
While the other states were down – Western Australia saw a drop of 10 per cent, 9 per cent decline in the NT and a 7 per cent drop in both Queensland, South Australia and the ACT.
[Related: Business credit demand bounces back in NSW]
