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Commercial and business lending settlements continued to fall in the September quarter amid COVID-19, but many brokers are expecting a pick-up in 2021, according to a survey.
The FAST Business Lending Index revealed that settlements for commercial and business lending in the September quarter was down 3.6 per cent from the June quarter, and down 28 per cent from the same September quarter a year ago.
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The data, based on a survey of 24 business lenders, also found that total leasing settlements for the three months to 30 September fell slightly from the previous quarter but remain down 9 per cent from the 30 September quarter a year earlier.
However, many brokers indicated that they expect commercial lending to ramp up as businesses move into 2021, with the index report showing that 49 per cent of brokers expect to write more commercial investment property loans over the next six months, up from 27 per cent in April.
Meanwhile, 33 per cent of brokers expect to write more business growth and acquisition finance over the coming six months, up from 19 per cent in April.
FAST surveyed its broker network over October and November for the index to identify how the COVID-19 crisis was continuing to impact their businesses, and found that respondents were more optimistic about conditions compared with April and May.
The report found that while the impacts of COVID-19 on broker businesses remain present, four in 10 brokers now expect to see a positive impact from the crisis.
This is an improvement from April, when 76 per cent of brokers reported a negative impact on their business.
The survey also found that 42 per cent of FAST brokers are now expecting to write more finance for cars and light commercial vehicles over the next six months, up from 21 per cent in April. Nearly a third – or 29 per cent – expect to write more finance for heavy commercial vehicles, up from 12 per cent.
The number of brokers expecting to write more finance for yellow goods, such as cranes and heavy agricultural equipment, has outnumbered those expecting to write less by three to one.
Commenting on the index, FAST CEO Brendan Wright said that brokers are becoming less concerned about the negative impact of COVID-19 on their businesses and more optimistic about the outlook for commercial lending and equipment finance as the economy rebounds.
“The COVID-19 pandemic and social distancing rules have had a dramatic impact on commercial business lending across Australia; however, brokers are now seeing demand rebound across industries as restrictions continue to ease and the economy begins to cover in response to fiscal stimulus,” Mr Wright said.
Speaking about the brighter outlook for equipment finance, Mr Wright said that the positive results have reflected government stimulus announcements in the federal budget 2020-21, low interest rates and competition among lenders that has led to cashback incentives for refinancing.
Included in the budget was the ability for businesses to write off the full value of new assets and claim full deductions for the cost of improvements made to existing depreciating assets. Small businesses with up to $50 million in annual revenue can also apply for full expensing to all second-hand assets.
“The net result is an increase in demand for leasing as brokers work with their business customers to take advantage of these incredibly accommodative measures, which have been introduced to help SMEs get back on their feet,” Mr Wright said.
He added that one of the largest areas of expected growth in the next six months is financing for business growth, and said brokers are working with SMEs to grow their businesses organically or through acquisitions.
“Our brokers are also seeing a lot more demand for commercial investment and owner- occupied commercial property,” Mr Wright said.
“For those businesses for which COVID has been a time of growth, this lower interest rate environment, together with the softening of some segments of the commercial property market, has seen opportunities – an opportunity for a business to secure their own premise or to purchase a commercial investment property.
“With strong fiscal stimulus, record-low rates and an easing of social distancing restrictions, brokers and their clients have plenty to be excited about in 2021,” he concluded.
[Related: Brokers a saviour for SMEs during pandemic, research finds]
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