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Despite high inflation and rising interest rates, credit inquiries increased by almost 30 per cent in the month to March 2023, new data reveals.
The March 2023 CreditorWatch Business Risk Index (BRI) has revealed “on multiple indicators” that business activity has returned to pre-COVID-19 levels as business confidence grows.
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The data showed credit inquiries increased 28 per cent from February to March and were up “a massive 149 per cent” year on year. However, it’s important to note at the start of 2022, businesses were grappling with pandemic uncertainty after several lockdowns.
The data followed Banjo’s SME Compass report for 2023, which surveyed more than 1,000 SMEs across Australia and revealed that one in three SMEs are planning to acquire for growth in 2023.
Just as SMEs continue to plan, acquire, hire, and grow, the demand for mortgage brokers writing commercial loans has increased, too, with the Mortgage and Finance Association of Australia’s (MFAA) Industry Intelligence Service Report (IIS), reporting mortgage brokers who wrote commercial loans during the April to September 2022 period rose to a “new high” of 6,118 brokers.
Senior finance broker Grant Rheuben at Loan Market in Melbourne said there was still opportunity out there for businesses.
Mr Rheuben said some businesses were looking for acquisition opportunities, leveraging off their current equity in their property or their current strength in their business, or looking to acquire something.
“A lot of our clients aren’t sitting still,” Mr Rheuben said.
“I think [some are] either sitting very quiet, or [they’re] looking to do things and a lot may be driven by the industry and their cash flow.”
But he added many businesses had accumulated tax debt and were dealing with the Australian Tax Office (ATO) chasing that debt.
“There’s a number of business owners out there who have struggles with ATO and they’re not in a position to do any [business lending],” Mr Rheuben said.
The data also showed businesses’ average trade receivables for March were sitting at $122,223, 8 per cent below the March 2020 figure, which can be attributed to “high work volumes that businesses are working through”.
The increase in receivables was consistent with the Australian Bureau of Statistics’ (ABS) Monthly Business Turnover Indicator for February, which showed year-on-year increases in turnover across nine of 13 industries, with the construction industry recording the highest month-on-month increase in business turnover at 4.6 per cent, despite industry collapses.
CreditorWatch chief executive Patrick Coghlan said the increase in business activity in March is a testament to the resilience of the Australian business community.
“From a pandemic to labour shortages, supply chain disruptions, high inflation and rising interest rates, Australian businesses have had it all thrown at them,” he says.
“To now be registering these increases in turnover is a very encouraging sign. However, we can’t ignore the forecasts for more tough times ahead as demand drops and cost pressures remain.”
Tough conditions ahead, CreditorWatch warns
Indeed, the Business Risk Index revealed payment defaults were up 20 per cent year on year following a seasonal dip in December and January.
The data revealed the business sector has now entered what will be some of the toughest trading conditions for some time, expecting demand to reduce while interest rates remain high.
The food and beverage sector continues to stand out as being most at risk of defaults.
Indeed, the construction sector has made recent headlines with a number of companies collapsing recently, which has left mortgage holders in the lurch.
CreditorWatch said high costs have been damaging to this sector with many projects being completed at a substantial financial loss to the builder.
[Related: Business confidence increases as price pressures ease]
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