Business credit applications on the rise in resource-heavy states

The divide between Australia’s three mining states and the rest of the country appears to be growing, as the Northern Territory, Western Australia and Queensland lead the way in growth of business credit enquiries in the first quarter of 2012.

According to Veda’s Commercial Credit Demand Index for the March 2012 quarter, the three big mining states are responsible for the majority of the 8.8 percent country-wide growth in credit enquiries, with the other states lagging behind.

“It’s no surprise that business credit applications have been stronger in the resource-sector heavy states.  Overall there has been an increase in all states, which is a positive indicator but highlights that the two-speed economy continues to accelerate the disparity between these state economies,” Veda head of commercial risk Moses Samaha said.

The study also showed SMEs across the country are suffering from a cashflow crunch, with credit enquiries on the rise. In comparison to last year, credit card enquiries are up 32.5 percent, trade finance up 68.5 percent and overdrafts up 76.8 percent.

SMEs with between five and 50 employees are responsible for around 49 percent of business credit enquiries and 55 percent of external administrations, despite making up only 12 percent of the population.

“It’s becoming apparent that there is also a deepening of the enterprise versus SME business divide across Australia, with SMEs relying on more credit options to smooth out cashflow,” Samaha said.

SMEs of five to 50 employees also drove a large share of defaults, with figures showing a rise in default rates in manufacturing and wholesale trade. Accommodation and food services did register a decline in the number of faults registered in the March quarter.

On a state-by-state basis, New South Wales saw a rise in default rates and was responsible for 38 percent of all defaults in the March quarter. Victoria and Queensland both saw declines in default rates.

An overall growth of 8.8 percent was shown in business credit applications over the last year, which is a promising result as 18 months ago applications were contracting.