Equifax Quarterly Commercial Insights: December 2024
- Overall business credit applications decreased by -3.2% (vs December quarter 2023)
- Business loan applications grew +3.6% (vs December quarter 2023)
- Asset finance applications fell by -7.9% (vs December quarter 2023)
- Trade credit applications declined -3.4% (vs December quarter 2023)
SYDNEY – February 2025 – Demand for commercial credit declined in Q4, reflecting softening business confidence and the impact of unchanged interest rates, the latest data from Equifax reveals.
According to the Equifax Quarterly Commercial Insights - December 2024, commercial credit demand fell by -3.2% in Q4 2024 compared to the same quarter the previous year. This was driven by a decline in asset finance applications, down -7.9% year-on-year, due to lower enquiries from professional services, construction and retail sectors. Trade credit demand also declined (-3.4%), while business loan applications grew (+3.6%), driven mainly by enquiries in Queensland and South Australia.
Scott Mason, General Manager Commercial and Property Services, Equifax, said: “The declining appetite for business credit, and the considerable drop in asset finance applications in particular, suggests that many businesses are hesitant about borrowing and investing in capital. This is another indicator of low business confidence, which remains well below average levels according to recent reports.”
Insolvency rates at the total market level increased by +48% in the December quarter 2024 vs the same period in 2023. While high insolvency rates were observed across all regions, Victoria (+72%) and South Australia (+73%) stood out with the highest growth in the number of insolvencies registered in the quarter.
In Victoria, construction insolvencies rose by 79%. South Australia had high insolvency rates in construction, retail, professional services and financial services - the same industries that also saw increased demand for business loans and trade credit enquiries. This could indicate that businesses are reaching for credit to stay afloat in tougher market conditions.
Red flags for SMEs and Sole Traders
Equifax data shows the falling demand for asset finance and trade credit is being countered by a rise in consumer credit demand from self-employed individuals and SMEs. Auto loan demand for the SME and Sole Trader cohort was 14% higher in Q4 2024 compared to the same period in 2023, while demand for credit cards was up 13%.
Concerningly, as the demand for auto loans and credit cards have increased, so have arrears for these products. SME and Sole Trader arrears for auto loans are 35% higher than they were in December 2023, and arrears rates are further elevated in certain sectors: business owners in the construction (+75%) and hospitality (+43%) sectors have seen a spike in auto loan arrears rates. Construction and hospitality SME credit card arrears rates have also doubled since December 2023.
“The concurrent increase in SME personal credit applications and arrears is a potential red flag. SMEs and Sole Traders, particularly those working in industries facing high insolvencies and difficult market conditions, could be struggling to get commercial finance and instead are turning to personal lines of credit to support their businesses,” Mr Mason said.
Business credit demand December 2024 vs December 2023:
Overall business credit applications declined -3.2% in the December quarter 2024. SA (+4%) and ACT (+1%) experienced increases, while QLD (+0%) was flat. TAS (-12%), VIC (-6%), NT (-6%), NSW (-5%) and WA (-1%) experienced declines.
Business loan applications increased (+3.6%) in Q4 2024 compared to the previous year. SA (+15%) led the increases in demand, with ACT (+8%), QLD (+8%), WA (+3%) and NSW (+2%) also seeing positive growth. TAS (-5%) was the only region to experience a decline, while VIC (+0%) and NT (+0%) were flat.
Trade credit applications fell in Q4 2024 (-3.4%). NSW (-8%), ACT (-7%), VIC (-6%) and TAS (-6%) all experienced declines, QLD was flat (+0%), while SA (+7%), NT (+3%) and WA (+1%) experienced growth in demand.
Asset finance demand fell –7.9% in the December quarter. TAS (-22%), NT (-17%), SA (-10%) and QLD (-10%) experienced the biggest decreases in demand, followed by NSW (-8%), VIC (-7%), WA (-1%) and ACT (-2%).
IMAGE 1: Overall Commercial Credit Demand – December 2024 Quarter
IMAGE 2: Equifax Commercial Credit Demand Index by categories of credit – December 2024 Quarter
IMAGE 3: Business Loan Applications State Overview, 2024 Q4
IMAGE 4: Asset Finance Applications State Overview, 2024 Q4
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NOTE TO EDITORS
The Equifax Quarterly Commercial Insights (formerly Business Credit Demand Index) measures the volume of credit applications that go through the Equifax Commercial Bureau by financial services credit providers in Australia. Based on this, it is considered to be a good measure of intentions to acquire credit by businesses. This differs from other market measures published by the RBA/ABS, which measure new and cumulative dollar amounts that are actually approved by financial institutions.
DISCLAIMER
Purpose of Equifax media releases:
The information in this release does not constitute legal, accounting or other professional financial advice. The information may change, and Equifax does not guarantee its currency or accuracy. To the extent permitted by law, Equifax specifically excludes all liability or responsibility for any loss or damage arising out of reliance on information in this release and the data in this report, including any consequential or indirect loss, loss of profit, loss of revenue or loss of business opportunity.
