Asset finance demand especially strong, report shows
Demand for business loans, trade credit and asset finance in Australia has grown year-on-year in the September quarter, following a dip in the second quarter, new figures have revealed.
The Equifax Quarterly Commercial Insights – September 2022 Index (formerly known as the business credit demand index) measures volume of credit applications for trade credit, business loans and asset finance.
Information provided by the global credit data and analysis firm shows that demand in the SME lending sector was up across all credit types despite ongoing economic turbulence. The overall growth was led by an increase in asset finance applications.
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Business loan applications rose in the September quarter, growing +2.6% compared to the same period in 2021 and +25.2% compared to the same quarter in 2020.
Asset finance applications grew strongly in Q3 2022, increasing +5.2% vs the September quarter 2021 and +14.1% compared to the same period in 2020. Across the states, the highest growth was recorded in NSW (+19%), followed by Victoria (+10%) and the ACT (+6%), as shown in the graph below.
Trade credit demand also grew, increasing +2% compared to the previous year and up +2.8% compared to the September 2020 quarter.
Equifax general manager commercial and property services Scott Mason (pictured above) said businesses were operating against a considerably different backdrop this year, when compared to the same quarter in 2021.
“Last year, several states including NSW and Victoria were in the midst of the Delta variant lockdowns,” Mason said. “As a result, much of the growth in business credit demand is being led by these states.”
“We’re also seeing industry-specific trends that reflect the changing business conditions year-on-year. For example, demand for trade credit in the accommodation and food services industry increased 14% this quarter. This suggests these businesses, which were some of the hardest hit during COVID, are taking on credit to rebuild or shore up their operations ahead of the upcoming Christmas period.”
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Mason said consumer demand continued to outstrip supply when it comes to construction.
“This is why we are seeing healthy asset finance growth for this sector – up 8% year-on-year. However, these demand figures don’t mean that construction operators are out of the woods, as insolvency rates in the sector continue to rise.”
The figures in the Equifax index showed that insolvencies surged in Q3 2022, up +59% in September 2022. Mason said although rising economic pressures contributed to the uptick, the increase continued the upward trend in insolvencies observed throughout 2022, as volumes got closer to pre-COVID levels.
Construction insolvencies also remained high, up +139 in Q3 2022 compared to Q3 2021. Insolvency levels in the food services and accommodation and retail trade industries also continued to climb.
