Demand for business credit increases

Small and medium businesses (SMEs) are borrowing more credit, according to the Veda Quarterly Business Credit Demand Index released this month.

Overall in the March quarter, there was a 2.1 per cent year-over-year rise in applications from SMEs for business loans, trade credit and asset finance.Business loan applications alone have risen 4.2 per cent and commercial mortgage applications have gone up 18 per cent this quarter, the report stated. This is largely thanks to SMEs that are taking advantage of lower interest rates and lapping up properties.

Asset finance, which includes hire purchases and personal loan applications, also began to flourish with the contraction rate halting to -0.2 per cent in March after skidding nearly 10 per cent between June and September last year, Veda reported.

Moses Samaha, Veda's general manager for commercial credit, said it was also important to look at the property market to explain what businesses are using the credit for.

"Veda's Quarterly Business Credit Demand Index gives a particularly good indication of what's happening at the SME level. The growth in commercial mortgage applications shows the same factors that are driving consumer credit demand – such as low interest rates – are driving SME interest in property," he said.

The figures seem to conclude that Australian businesses are looking to invest in the future and are starting to make advances by stepping onto the property ladder. As these figures are expected to only improved, SMEs can make further plans going forward into the next quarter.

Businesses with an increased amount of capital can invest in efficiency software and productivity solutions that can help the company as it expands further into the market and begins to take on more employees.