Australian Credit Climate: Covid-19 Impact on SME Commercial Lending

Stimulus Boosts Commercial Lending but Many Businesses Are Taking Longer to Pay

Equifax has been monitoring the impact of government stimulus on commercial SME lending, as well as tracking trade payments to determine the impact of COVID-19. Key highlights for the end of the financial year are:

Following the Government’s rescue packages that kicked off from 22 March. commercial lending has increased. This is not only across participating lenders* but the market in general
The size and quality of commercial loans has also increased with Equifax observing a marked increase in the borrowing amount per application for participating lenders and an improvement in the quality of these applicants for government backed loans (up 15pts)
- The rescue package boosted the average loan size per application from $33K in February to $44K at the end of May 2020 for participating lenders
- Those lenders not participating had an increase of average loan size from $20K in February to $26K at the end of May 2020
Most lending post the government stimulus has been business loans (40-55%), however approaching the end of financial year applications for asset finance accelerated
The demand for credit is predominantly being driven by larger commercial entities rather than smaller entities

Equifax is also now seeing a distinct trend in businesses paying later across the board. Some industries are being impacted more than others, as a result of COVID-19 shutdowns.

The food and accommodation services sector has been hardest hit at 14+ days beyond term (DBT), however other industries are also feeling the pressure – information media and telecommunications services (10+ DBT) and financial and insurance services (8+ DBT) have had sharp inclines in the past month