Business credit demand experienced double-digit growth in Q2 2021 with solid gains across all categories of credit, according to the Quarterly Business Credit Demand Index from global data, analytics and technology company, Equifax.
Business credit demand rebounded remarkably in the June 2021 quarter to surpass pre-COVID levels. Compared to June 2019, before the pandemic, business credit applications are up by 8.2% for the quarter. Compared to the June 2020 quarter when lockdown restrictions were in place, they increased by 14.4%.
Business loans performed strongly across the June 2021 quarter, with nearly every state and territory, experiencing a consistent bounce-back. Demand across Australia for business loans was 15.4% higher compared to the same quarter in 2020 and 11.3% higher than the same quarter in 2019 pre-COVID.
Construction and retail trade fuelled much of this growth. Business loan applications in the retail sector grew 11% in the June 2021 quarter compared with the June 2020 and June 2019 quarters.
The latest lockdown restrictions weigh on the good news story of Australia’s business credit demand recovery, according to Equifax general manager for commercial and property services, Scott Mason.
“Construction businesses are particularly reliant on the continuity of cash flow. The sector is thinly capitalised, with low margins and a fiercely competitive environment struggling to access labour and materials. Any small hiccup in the cashflow conversion cycle is likely to cause considerable pain,” he said.
“The impact to the construction industry may well cut deeper than it has for retail trade, which has been able to pivot from brick-and-mortar operations to an online experience. A substantial challenge for both sectors is to navigate a path forward without the breadth of stimulus and support measures and protections previously provided.”
Asset finance continues to recover strongly in the June 2021 quarter, driven by auto finance and the instant asset write-off scheme. Asset finance applications were up 9.8% compared to the same quarter last year when businesses were incentivised to source relevant depreciating assets eligible for immediate write-off.
Trade credit demand delivered a strong performance in the June 2021 quarter (19.4%), recovering well from the substantial fall it experienced during the pandemic. When compared with June 2019, applications are on par with pre-COVID levels.
“Trade creditors, by the nature of their business, feel the impact strongly of lockdowns and falling business confidence. We’ve seen trade credit applications recover in this quarter, but at a slower rate to business loans and asset finance”, Mason added.