Banjo Loans has reported a 40 per cent decline in SME loan applications compared to last year. Loan applications fell for a fifth consecutive quarter in the three months to June, which saw a borrowing drop of 20 per cent.
The quarter also saw a 14 per cent drop in loan values, as well as an 11 per cent rise in loans being declined. Banjo Loans reported an inability to service new loans, ATO debt, and adverse existing credit as key reasons for the drop in acceptance rates.
The SME loan application decline occurs in what is usually a strong period for borrowing, suggesting that weak economic conditions are taking their toll on business growth.
“SMEs seem to be bracing for ongoing weak business conditions in the short to mid-term and they’re turning away from new finance,” said Banjo Loans CEO Guy Callaghan.
Among the sectors impacted by the drop in loan applications were Transport, Postal and Warehousing, and Construction. Outliers included retail SMEs, wholesale traders, and financial and insurance services, who increased their borrowing by 22 percent, 42 per cent, and 400 percent respectively this quarter.
There was also variation across regions. Western Australian, South Australian, and New South Wales SMEs increased their loans over the past quarter, despite NSW loans being down 50 percent year-on-year. Other states recorded borrowing dips in line with overall trends.
“Australian SMEs appear to have gone into hibernation,” said Callaghan. “We may have seen some green shoots in the data from earlier this calendar year, but these latest findings indicate that long term subsistence is the mood of the day.”
Loan arrears improved during the June quarter, indicating that SMEs are focussing on keeping abreast of existing debt.
