Data from the initial days of NSW reopening after lockdown has shown a spike in demand across all categories of business credit, according to new data.
Global data, analytics, and technology company Equifax has released its Quarterly Business Credit Demand Index for September 2021, which has revealed that the recovery in business credit demand eased in the third quarter of 2021 (Q3 2021) but recovery may be looming as NSW and Victoria exit lockdown.
Indeed, data from the first four days of NSW reopening after 15 weeks in lockdown has shown a 25.1 per cent increase in asset finance inquiries, a 15.5 per cent rise in trade credit, and a 2.5 per cent rise in business loans in the week of 11-14 October, compared to the previous week in lockdown.
Overall business credit applications were up 13.7 per cent in the September 2021 quarter compared to the same quarter in 2020, driven by a 22.0 per cent rise in business loan applications compared to Q3 2020 and a 7.0 per cent rise compared to Q3 2019 pre-coronavirus pandemic.
Business credit applications rose in Victoria (29.0 per cent), Queensland (16.0 per cent), Tasmania (9.0 per cent), Western Australia (8.0 per cent), NSW (5.0 per cent) and the ACT (5.0 per cent) but plummeted by 14.0 per cent in the Northern Territory.
Business loan applications rebounded across all states and the ACT, led by Victoria (35.0 per cent), followed by Queensland (25.0 per cent), NSW (18.0 per cent), South Australia (16.0 per cent), the ACT (15.0 per cent), Tasmania (9.0 per cent), and Western Australia (8.0 per cent). However, once again, applications slid in the NT (down 28.0 per cent from low volumes).
The demand for business loans in the construction sector was higher than it has been for two consecutive years (Q3 2019 and 2020).
Asset finance applications rose by 8.5 per cent in Q3 2021 compared to the same period in 2020, but they plunged in the states that were locked down.
For example, applications were down by 30.0 per cent in Victoria compared to the previous quarter, but were up 40.0 per cent compared to the previous year, while the ACT recorded a 5.0 per cent drop.
In NSW, applications plunged by as much as 35.0 per cent compared to the second quarter of 2021 when there were no lockdowns, and dropped by 9.0 per cent in Q3 2021 compared to the previous year.
By comparison, the states and territories that stayed out of lockdown showed increases in asset finance inquiries, including the NT (up 20.0 per cent from a low base), Tasmania (up 14.0 per cent), Queensland (up 10.0 per cent), South Australia (up 8.0 per cent), and Western Australia (up 8.0 per cent).
Trade credit demand was relatively flat (up 0.8 per cent) in the September quarter compared with the same period last year but was down 6.0 per cent when compared to the pre-COVID quarter (Q3 2019).
Positive demand was seen in Western Australia (up 9.0 per cent), Queensland (up 6.0 per cent), Victoria (up 3.0 per cent), and Tasmania (up 3.0 per cent), but applications were down in the ACT (9.0 per cent), NSW (6.0 per cent), South Australia (3.0 per cent), and the NT (down 3.0 per cent from low volumes).
SMEs turn to non-banks for quicker turnarounds
Commenting on the trends, general manager commercial and property services Scott Mason acknowledged the negative impact of lockdowns on business credit demand but noted that the impact is less compared to last year’s lockdown.
He said: “It seems we’re all getting better at coping with lockdowns, which might help to hasten our economic recovery once businesses fully reopen.”
Mr Mason observed that small businesses of less than 20 employees have been 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,” he said.