Business loans up, with Queensland, Western Australia leading the charge
A strong showing for business loans across the eastern seaboard led to a bullish third quarter for Australia commercial credit demand.
Per the latest Equifax Quarterly Commercial Insights report, overall commercial credit demand increased by 3% year on year in the quarter, with business loan applications surging by 5%.
In comparison, the same period in 2024 saw a 0.7% year-on-year increase in commercial credit applications and a 4.5% rise in business loan applications.
Queensland and Western Australia led the charge with 5% growth in over credit demand each, followed by New South Wales at 4% South Australia at 2%.
The small Northern Territory market proved a drag, with overall credit demand slipping by 10%.
“The higher demand for commercial credit Equifax is seeing across the board is supported by greater market confidence, reflected by an influx of high credit quality entities whose average credit scores have been steadily rising,” said Equifax’s general manager commercial Brad Walters.
Larger businesses demonstrated stronger appetite, added Walters, with commercial credit demand from this segment increasing by 4.2%.
However, SMEs also contributed positively, with demand rising 2.7% year-on-year.
Among loan types, asset finance applications edged up by 0.7%, while trade credit applications fell 3.7%.
Commercial insolvencies down
Encouragingly, insolvency volumes dropped nationally by 2.1% year-on-year — the first such decline since 2021.
Walters said: “Although insolvencies continue to be a challenge for the construction sector, our data also reflects that the total number of insolvencies has reduced by 4.1% since September 2024, a hopeful sign of a sector experiencing slow recovery.”
Despite the improvement, the agriculture (+61%), mining (+40%), public administration & safety (+36%), and transport & warehousing (+34%) sectors reported higher insolvency rates.
SMEs in Queensland, Western Australia, and South Australia led state-based growth, with credit demand in each rising by at least 5.2%. In contrast, Victoria continued to contract, though its performance improved from the second quarter.
Cyclical holiday uptick
Matthew Porch, head of distribution at private commercial finance lender Aquamore, has seen activity pick in the lead up to the holiday season.
“With interest rates stabilising, deferred consumption appears to be dropping off and businesses will by default, have more clarity on their borrowing costs which is likely driving an increase in commercial applications,” Porch told MPA.
“Aquamore has certainly seen a flurry of activity in the past six weeks however we believe this is cyclical as people look to tidy up their lending arrangements before Xmas time.”
However, Porch has seen a contraction in Victoria, reflecting the sluggish data presented in the Equifax report.
“Business conditions continue to make life hard for Victorian based borrowers,” noted Porch.
