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Business credit demand recovers as lockdown ends

Global data analytics and technology company Equifax has released its Quarterly Business Credit Demand index for September 2021, showing a jump in demand across all categories of credit. 

In the first 4 days out of lockdown, asset finance enquiries rose 25.1%, trade credit by 15.5% and business loans by 2.5% compared to the previous week in lockdown. 

Undoubtedly, the pandemic and prolonged lockdowns have put a dampener on the demand for business credit. Some businesses were forced to close or had people coming back to cancel or get refunds. It literally was like someone turned the cash flow tap off. So naturally, they were reluctant to take on debt given the uncertainty about the economic outlook. They had to rely on short-term initiatives to keep the wheels turning. 

As states have reopened, more and more businesses are now in need of access to working capital to recover or expand. Leases are opening up everywhere. Businesses are scrambling to get new equipment, upgrade their shops (which have been sitting there gathering dust for months) and hire skilled staff. 

“There’s no doubt that the lockdowns of this last quarter have hurt business credit demand, but the impact is less than we saw during last year’s lockdown. It seems we’re all getting better at coping with lockdowns, which might help to hasten our economic recovery once businesses fully reopen.” Scott Mason, General Manager Commercial and Property Services, Equifax, said

This is good news. We’re expecting to see more businesses accessing loans to cover cash flow shortfalls until they have sufficient working capital to cover these independently. 

Let’s take a look at the head-turning data!

Equifax Quarterly Business Credit Demand Index: Sept 2021

  • Overall business credit applications grew by +13.7% (vs Sept quarter 2020)
  • Business loan applications increased by +22.0% (vs Sept quarter 2020)
  • Trade credit applications flat +0.8% (vs Sept quarter 2020)
  • Asset finance applications rose by +8.5% (vs Sept quarter 2020).

The timing is right to organise business finances, as people start to re-emerge back into the workplace and feel a lot more comfortable travelling and dining out. 

Business credit applications rose across Australia (+13.7%) with the exception of NT (-14.0%). Applications were up in VIC (+29.0%), QLD (+16.0%), SA (+9.0%), TAS (+9.0%), WA (+8.0%), NSW (+5.0%) and ACT (+5.0%)

Equifax data also shows that credit is currently in high demand amongst small to medium enterprises (SMEs) of less than 20 employees. For your information, the impact of lockdowns was heavily skewed towards SMEs – which are strongly represented in the sectors such as hospitality, events, arts and recreation. The majority of these businesses were operating on the brink, just trying to survive a pandemic and were twice as likely to record a large decline in revenue. That’s why small businesses are overwhelmingly seeking out funds to map out the best way to adapt to the new normal. 

SMEs prefer Non-bank finance 

The data also pointed out a trend for SMEs to choose non-bank lenders for funding instead of banks. The reason: small lenders are less “risk-averse”, they offer products and turnaround times that are “advantageous” helping business owners to make snappy decisions to move their businesses forward. 

One of the common reasons that is pulling SMEs towards alternative lending is that business owners no longer want to put their property up as security. It’s the security requirement of traditional banks that is putting them off. One in every four SMEs have their finance applications rejected by the bank and once this happens, they are unlikely to return. 

So you see, navigating the world of business loans can be tricky for many people. Brokers will likely be the first port of call that these business owners go to to help them steer clear from expensive mistakes. After all, it’s always good to understand what the options are and then choose which is the best loan for their business.

This is an opportune time for mortgage brokers to extend your service offering, at the same time, be fully BID-compliant. As a business owner yourself, you ought to be agile and move fast to meet the increasing volumes of small business loans. How do you do that when you don’t have a large panel of lenders that do these types of loans? Find a tech solution that works for your brokerage. 

Enter eBroker – Effi’s newest partner which happens to be Australia’s number #1 non-bank small business loan marketplace. eBroker is a free online service that matches your clients with the most suitable business loan from a panel of 80+ lenders! 

We selected eBroker to help facilitate our move towards business finance. This is the first time a lead management platform successfully secured a market leading revenue share model with mortgage brokers for the lifetime of the client. Brokers who are currently using Effi can leverage eBroker to meet the growing demand and earn commission in business finance. 

All you need to do is submit the business loan deal to eBroker via the Effi clever portal and let eBroker handle the rest. eBroker will contact your clients, find the right non-bank lenders, and assist them throughout their entire loan journey. Meanwhile, you have 100% ownership of the client and complete visibility of the notes/calls in our system for your tracking. Once the loan is settled, you will receive up to 63% of the total commission provided by the lender within 7 days of the loan settlement.

Since day dot, Effi aims to bring unparalleled access to a highly efficient onboarding process to brokers’ clients looking for a loan; and provide the best opportunity for our brokers to grow their business further through our platform such as earning a passive income stream on business loans. 

As Effi scales alongside the flourishing mortgage industry, our team will continue to improve our platform and the services it provides to meet the demands of our growing user base. Some platforms work, some don’t, and you don’t know until you try it. Get your 14-day free trial today!