Business credit demand falls

| November 3, 2010

SMEs remain reluctant to take on credit but there are some indications that lending appetites on track to reach pre-GFC levels.

The Veda Advantage Business Credit Demand Index fell 5.7 per cent in the last quarter on a year earlier. “Given the high cost of raising capital in the current market, many small to medium sized businesses are focusing on cost containment and growing existing business, rather than embarking on aggressive new customer acquisition strategies and other forms of business innovation,” Hamish Osborn, Head of Commercial Risk at Veda Advantage said.

On a monthly basis, business credit demand fell 2.1 per cent in July, 10.2 per cent in August and 2.4 per cent in September on year. 

Mr Osborn said the end of the Government’s economic stimulus package appears to have caused a 10.7 per cent reduction in demand for asset finance, over the first nine months of 2010 compared to 2009.

“There are some positive signs emerging following a dip in August around the federal election. The September business credit demand figure is the closest to the same month in 2007 than any month in 2010, so demand levels may be showing the first signs of returning to pre-GFC levels,” he said.

All states recorded a decline in credit demand year-on-year with the steepest decline in South Australia (-8 per cent) and the ACT at the other end of the spectrum (1.5 per cent).

For more: Veda Advantage