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Quarterly lending data shows small businesses are shelving growth plans, with loan applications falling 20 per cent in Q4.
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SMEs enter ‘survival mode’, rate cut hopes fade
25 July 2024
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SMEs have gone into “survival mode” and are shelving growth plans as hopes of interest rate or cost-pressure relief fade, recent data shows.
Business lender Banjo’s SME Barometer Report found loan applications fell 20 per cent in the three months to June, marking the fifth consecutive quarterly decline in what it said was typically a strong quarter for borrowing.
Meanwhile, the number of rejected loans was increasing – climbing 11 per cent over the last quarter and up 87 per cent compared to last year.
“In what is typically a strong quarter for SME borrowing, loan activity has gone backwards – both in the volume of applications and the value of loans,” the report said.
“After observing some green shoots in data from earlier in the calendar year, our latest Banjo Barometer suggests that businesses have paused, or halted any growth plans. Instead, a mood of survival is showing through in business loan activity and sentiment.”
“Australia’s SMEs appear to have gone into hibernation.”
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Banjo said the fall in borrowing and rise in rejections meant slow economic growth was starting to bite while expectations of near-term interest rate and cost-pressure relief dimmed.
ATO debt and business inability to service new loans were also driving loan rejections, it said.
The slowdown in borrowing was most evident among businesses in NSW and Victoria, where the value of SME loans was down 50 per cent from the start of the year in NSW and 41 per cent in Victoria.
There was also a “broad cooling” across all sectors except financial and insurance services.
Businesses in transport, postal and warehousing cut loan applications by 54 per cent compared to last quarter, followed by construction services (23 per cent) and accommodation and food services (17 per cent).
But applications among financial and insurance providers bucked the downward trend, doubling over the same period (up 400 per cent).
The wholesale trade sector also recorded an improvement of 42 per cent over the quarter, however, applications were still down 41 per cent compared to last year.
“At an industry level, there are positive signs among pockets of the Services sector, with financial and insurance providers a standout – doubling applications over the year. It is, otherwise, not positive reading,” Banjo said.
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