Mining states surge ahead in SME credit demand

New research reveals business credit inquiries increased in the first quarter of 2012, with demand driven by the mining states, suggesting start-up opportunities in mining regions are on the up.

According to data intelligence company Veda, which has released its Quarterly Commercial Credit Demand Index for January to March, the mining states are driving demand for credit.

The index shows overall business credit inquiries increased by 8.8% compared to the same period last year, thanks to strong demand from the Northern Territory, WA and Queensland.

In these regions, inquiries increased by 18.6%, 11.6% and 10.2% respectively.

Overall, credit card inquiries are up 32.5%, overdrafts 76.8% and trade finance 68.5% compared to the same period last year.

Businesses with five to 50 employees represent just 12% of the population; yet typically make up around 49% of credit enquiries and 55% of external administrations.

Moses Samaha, head of commercial risk at Veda, says it’s no surprise business credit applications have been stronger in the resource-rich states.

“Overall, there has been an increase in all states, which is a positive indicator, but… the two-speed economy continues to accelerate the disparity between these state economies,” he says.

Overall, the index shows business credit applications have picked up, showing growth of 8.8% over the year to the March quarter.

This is a notable turnaround in business credit applications from 18 months ago, when business credit applications were contracting.

The lift in overall business credit applications has been driven primarily by stronger growth over the past year in business loans and trade credit, while asset finance remains subdued.

Overall, business credit applications declined in the March quarter compared to the December quarter, with declines in business loans, trade credit and asset finance.

However, the March quarter typically sees a decline in applications for business credit due to seasonal effects.

Importantly, business credit applications have picked up compared to a year ago.

With regard to business loan applications, lending proposals is the largest sub-category, accounting for around 40% of business loan applications.

Again, the mining states lead the growth in business loan applications, with the Northern Territory (up 26.6%), Queensland (up 21%) and WA (up 17.6%) all showing strong growth.

However, Victoria and NSW are not far behind, up 14.5% and 16% respectively.

By industry, businesses in construction (18.9%), manufacturing (14.1%), and retail trade (11.8%) accounted for the highest share of all commercial enquiries in the March quarter.

“The expected RBA prime interest rate cut should ease the economic pressure on the non-mining states and sectors like retail, tourism [and] housing construction,” Samaha says.

“[However,] it’s clear more needs to be done to stimulate these areas further.”