Equifax's Quarterly Business Credit Demand Index: April to June 2011

Equifax's Business Credit Demand Index*, released today, reveals business credit enquiries recordedtheir fifth consecutive monthly gain since February this year. In June 2011, credit enquiries recorded strong gains over the previous quarter, up 17.4% and 3.6% year-on-year but still remain lower than pre-GFC levels.
Despite this strong quarterly upsurge, business credit demand for the 2011 financial year ended 0.5% down on FY2010. Veda analysis of credit enquires reveals current credit levels are about 8.5% below levels recorded in pre-GFC times.
"We are seeing a return to the use of credit in the business market, following a ‘paused period' where businesses had brought forward credit decisions off the back of heavy government incentives following the GFC", says Moses Samaha, Head of Commercial Risk at Veda. "Despite positive growth in the past five months, overall business credit demand has yet to return to levels prior to the financial downturn. Assuming we can move beyond the current market volatility, we should see growth in credit demand gather pace in the second half."
Combined business loans and credit cards recorded strong gains, up 29.0% on the previous March quarter and up 12.6%year-on-year. Asset finance continued to show refreshed signs of improvement, increasing 10.3% since March 2011 and 1.6% year-on-year.
"As the banks look to drive activity in their business markets, we are seeing stronger results in credit demand for the June quarter", said Mr Samaha.
Trade credit recorded a quarter-on-quarter increase of 15.7% but remained flat year-on-year with 0.1% growth for the quarter.
"The trade credit figures signal that small-to-medium sized business, particularly start-ups and those in the retail trade sectors face increased vulnerability to fluctuations in market conditions. As the number of small businesses registering insolvent continue to rise, strong credit risk management practices are vital to protect cashflow. This includes proactively managing financial assets to maximise liquidity and to minimise the threat of taking on bad debt."
Telecommunications credit recorded strong growth, increasing 17.7% for the full year but had a softer fourth quarter, up only 1.0% on the previous quarter and down 3.0% year-on-year.
"The weak year-on-year results in business demand for telecommunications credit is likely to have been caused by a slowdown in customer acquisition campaigns heading into the June 2011 financial year," said Mr Samaha.
Detailed Business Credit Demand Index Results:
All states recorded year-on-year gains for the June quarter. Of the major states, Victoria recorded the largest gain, up 5.0%, followed by WA (4.0%) and NSW (3.3%). Queensland recorded the lowest gains of all states, 0.7%.
Business Credit Demand YoY

• Business demand for credit cards continued strongest year-on-year gains, up 53.8%and up 21.7% on March 2011.
• Business loans were up 9.0% on July 2010, but up 27.6% on the previous March quarter.
• Combined business loans and cards recorded strong gains, up 12.6%year-on-year and up 29.0% on the March 2011.
• Asset finance increased1.6% year-on-year and up 10.3% since March 2011.
• Trade credit remained flat at 0.1% year-on-year but recorded a quarter-on-quarter increase of 15.7%.

State breakdown YoY:

• The strongest gains of all states were NT, up 11.3% and SA, 8.1%.
• Victoria recorded third largest gain (5.0%), followed by WA (4.0%), ACT (3.4%) and NSW (3.3%).
• Queensland (0.7%) and TAS (1.9%) has the lowest gains.