Business credit demand up: Veda

Australian Banking + Finance Aussie businesses are borrowing more to take advantage of low interest rates.

According to the Veda Quarterly Business Credit Demand Index, applications for business loans, trade credit and asset finance rose by 2.4 per cent in the March 2015 quarter.

Most of that growth can be attributed to a big rise in business loan applications and asset finance applications which jumped 7.8 per cent and 2.2 per cent respectively. This is the first lift in finance applications since the June 2013 quarter.

Veda’s general manager of commercial credit, Moses Samaha, said: “During the March quarter we saw signs of a pickup in business credit growth after a softer December quarter. Growth in business loan applications was the strongest it has been since the December 2013 quarter, and we saw positive asset finance application figures for the first time in seven quarters."

The growth came from non-mining states, where business credit demand was up 3.4 per cent, offsetting the softer demand from the mining states of Western Australia, Queensland and the Northern Territory.

The index reveals that the pace of growth in overall business credit applications accelerated in all states with the strongest growth in Victoria and New South Wales.

In contrast, mining states showed weaker business credit demand with Queensland and Western Australia growing more moderately.

Increased competition

Within business loans generally, growth was driven in large part by the increased growth rate of mortgage applications and credit cards.

“Recently we’ve seen an upswing in business loan pledges by banks and other lenders. The increased competition in this space has created an attractive lending market for SMEs and contributed to the growth of business loan applications,” Samaha said.

Asset finance applications picked up in the March quarter after experiencing sharp falls throughout much of 2014. Improvement was across the board: commercial rental, hire purchase, and personal loan categories. However, leasing applications dropped.

“One year post the mining boom, it appears we may now be seeing what could be the new norm in growth rates for asset finance. There also appears to be a small return to growth in auto finance and IT asset finance in the market,” Samaha said.

Trade credit did not perform well. Applications fell by 2.6 per cent. Significant drops in trade credit applications were recorded across all states except for the ACT and Western Australia.

“The fall in trade credit applications is in line with the long term trend of softening trade credit demand. Softer trade credit conditions could be an early sign of moderate business confidence amongst non-lending credit providers,” Samaha said.





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Elizabeth Fry,

Article Posted:

April 15, 2015