Business credit demand has returned to the same level it was in the March 2020 pre-pandemic quarter, driven by a bounce-back in asset finance (+8.9%). Business insolvencies have yet to match their March 2020 level (down -36% compared to March last year) but are rising, month on month up by +78% in February and +29.0% in March, according to the latest Equifax Quarterly Business Credit Demand Index (March 2021).
Released today by Equifax, the global data, analytics and technology company and the leading provider of credit information and analysis in Australia and New Zealand, the index measures the volume of credit applications for trade credit, business loans and asset finance.
The March 2021 quarter has seen solid commercial demand, with overall business credit applications on par with the same period last year before the pandemic border closures and lockdown measures were implemented in late March 2020. Victoria also continues to rebound, down by only -3.0% this quarter compared with -12.0% the previous quarter.
This uptick in credit activity was fuelled by a large volume of credit information requests relating to asset finance (+8.9%), predominately from auto finance lenders (+25.0%). Demand for asset finance was also strong in the construction industry, where enquiries were up +10.0%.
Scott Mason, General Manager Commercial and Property Services, Equifax, said: “To see a rise in asset finance demand is a good sign for the economy demonstrating that businesses are starting to once again spend on replacement and renewal of equipment. The construction industry is a big user of asset finance, and this is the second quarter in a row applications have risen as the industry seeks to scale and grow.
“The expansion of the instant asset write-off scheme has also encouraged businesses to bring forward their spending on new assets, knowing they can claim a tax deduction upfront for the full value of the purchase.”
Business loan applications decreased by -2.0% in the March 2021 quarter but were unchanged compared with the December 2020 quarter. Head-to-head with the previous quarter, business loan applications in Victoria rose by +2.0% to draw even with Queensland and overtake NSW.
The worst performer was trade credit (-7.0%) compared to the prior year, but applications were slightly up in the March 2021 quarter compared to the prior quarter (+1.0%). In Victoria, trade credit applications also improved quarter to quarter.
Insolvency volumes (-36.0% compared to March 2020) are yet to make a significant shift, but they are rising month on month by +78% in February and +29.0% in March.
Source: Equifax news