21/05/2010 - 08:40

SMEs chase credit as lending rates climb

21/05/2010 - 08:40

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Business credit enquiries from small to medium businesses have grown steadily this year depsite over a third of SMEs having experienced a lending rate increase during the six months to April 2010, two separate surveys have shown.

Business credit enquiries from small to medium businesses have grown steadily this year depsite over a third of SMEs having experienced a lending rate increase during the six months to April 2010, two separate surveys have shown.

Veda Advantage's Business Credit Demand Index highlighted that business credit applications for the January to March quarter have increased by an average of 3 per cent over the same period in 2009.

Veda said the first quarter of this year saw the first consecutive monthly increases year-on-year since 2007, with January up by 5 per cent, February up by 13 per cent, and March up by 2 per cent year-on-year.

However, East & Partners' latest SME Report indicated that lending conditions for the SME sector remains challenging. East & Partners' ongoing six-monthly banking markets report suggested the average increase experienced by SMEs to their lending rate was 2.2 per cent.

Consequently, while 68 per cent of SMEs are planning to borrow in the next six months, this still remains relatively low when compared to the fact that over 80 per cent of SMEs were planning to borrow in April 2007.

Veda's report aslo found that credit inquiries fell in April with a drop of 4.4 per cent compared to April 2009 and a 1.9 per cent decline compared to the previous month of March 2010.

Comparisons between the January to March 2010 quarter and the previous September to December quarter of 2009 also reveal a 14 per cent fall in business credit enquiries.

 

 

Full announcements below:

 

Lending Woes Continue For SMEs

(21 May 2010 - Australia) East & Partners' latest SME Report has now been released with the report clearly showing that lending conditions for the SME sector remain challenging.

- over a third of SMEs have experienced a lending rate increase during a six month period from October 2009 to April 2010

- the average increase experienced by this sector to their lending rate is 2.2 percent

Consequently, while 68 percent of SMEs are planning to borrow in the next six months, this still remains relatively low when compared to the fact that over 80 percent of SMEs were planning to borrow in April 2007.

 

 

 

Business Credit Demand Index - Jan to March 2010

SMEs show cautious optimism - with first consecutive monthly increases in first quarter since 2007

21st May 2010: Veda Advantage's Business Credit Demand Index, released today, shows business credit enquiries grew steadily in the first three months of 2010, with business credit applications for the January to March quarter increasing by an average of 3% over the same period in 2009.

The January to March quarter saw the first consecutive monthly increases year-on-year since 2007, with January up by 5%, February up by 13%, and March up by 2% year-on-year. However, inquiries fell in April with a drop of 4.4% compared to April 2009 and a 1.9% decline compared to the previous month of March 2010. Comparisons between the January to March 2010 quarter and the previous September to December quarter of 2009 also reveal a 14% fall in business credit enquiries.

Chris Gration, Head of External Relations at Veda Advantage said: "The long-term outlook appears to be positive with the small and medium enterprise business sector showing more robust demand than 12 months ago. However some caution clearly remains in the market, with SME credit demand flattening and even starting to decline again.

"Government tax incentives for equipment and automotive purchases which ended on December 31 last year buoyed the market substantially, so a drop in business credit demand in the first part of 2010 was expected," he said.

"This flattening in business demand for credit is also congruent with reported drops in business conditions and business confidence in April, 2010, though business confidence remains well above the long term average. While business credit demand appears strong in the first quarter of 2010 with large increases in business credit cards and phone applications, business hesitancy remains around taking on loans. Utility accounts dropped considerably which may indicate some reluctance to expand into new premises," Mr Gration said.

Data points:
- The first quarter of 2010 saw growth in trade credit, up by 6% year-on-year.
- Business credit cards and telecommunications credit enquiries increased by 7.7% and 9.5% respectively year-on-year.
- Asset finance increased by 2.7% year-on-year.
- Business loans decreased by 0.2% year-on-year.
- Utility accounts decreased by 13.3% year-on-year.
- All states except for South Australia (-1.5%) experienced increases in the first quarter of 2010 year-on-year. Business credit demand in Tasmania and Victoria increased by 6%, Queensland and Western Australia up 5% and New South Wales remained flat.
- In April, trade credit dropped by 2%, business loans by 1.3%, and asset finance by 13% year-on-year.

Business credit accounts covered in this Index include: 30 day loans, hire purchase, lending proposals, commercial rentals, credit cards, bill of sale, utilities, personal commercial loans, real property mortgage, overdraft and more.

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