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Results released by the Commercial & Asset Finance Brokers Association of Australia (CAFBA) collected in collaboration with Agile Market Intelligence’s monthly Broker Pulse: Commercial Lending Survey have revealed that 53 per cent of commercial brokers are predicting demand for business loans to increase over the next three months.
These business loans include secured, unsecured, and line of credits. In comparison, only 3 per cent of commercial brokers predicted a decrease in demand, showing a net demand index of +50.
The foreseen increase in demand for business loans aligns with the negative outlook from commercial brokers on their customer’s business health over the next three months, according to the survey’s results.
The survey’s findings revealed that brokers have become more cautious of the revenue outlook for their clients, with 40 per cent of brokers expecting a decline, while 25 per cent predicted an improvement.
This has resulted in a net negative sentiment of -15 as concerns around declining revenues could foreshadow challenges related to consumer demand, cost pressures, or overall market conditions.
Additionally, 47 per cent of brokers are anticipating a deterioration in their clients’ cash flow and only 19 per cent expect an improvement. This has resulted in a net sentiment of -28, signalling that businesses may soon face liquidity issues.
This further suggested that this could lead to tighter credit conditions and increased pressure to secure financing or adjust operations.
Commenting on the results, CAFBA’s CEO David Bushby said that commercial and asset finance brokers are “uniquely placed to be advance[d] barometers for business sentiment”.
“They are dealing with small and medium businesses directly every day and talking to them about their appetite for investment for growth, financial needs, and challenges. All in advance of decisions to apply for finance,” Bushby said.
“As such, the results of these monthly surveys provide uncommon insight into what is driving business finance needs, good and bad, broken down across different sectors.”
Director of Agile Market Intelligence, Michael Johnson, said that while there is a degree of optimism around businesses seeking finance, the broader outlook “reflects significant challenges in maintaining revenue, cash flow stability and workforce levels”.
“Many brokers who we surveyed already understand this and are working closely with their clients to provide assistance and access to finance where suitable,” Johnson said.
These sentiments of growing demand are supported by activity seen by technology provider, Lend.
Lend’s head of broker and third-party distribution Andrew Beckett said that “... in the last two weeks the market seems to have swung, and the normal upward trajectory towards the Christmas rush has well and truly started.”
“A number of our users have also indicated that they’ve had some out of the box applications. The ability for them to have access to a comprehensive product matching engine was integral to them being able to assist their clients,” Beckett said.
“We think brokers should begin to gear up for increased demand whether that means streamlining their application processes, using tools to understand what products fit these more ‘out of the box’ deals and make sure to re-engage your client base regularly to see how you can help them support them.”
Furthermore, despite 52 per cent of brokers expecting equipment and asset finance demand to hold steady, 30 per cent expect an increase reflecting growth potential in capital investment, while 18 per cent expect demand to fall, revealing a cautious sentiment in this area.
Meanwhile, the survey found that expectations for commercial mortgage demand had a balanced perspective, with 26 per cent predicting an increase and 64 per cent expecting demand to remain unchanged.
Where is demand expected to change?
CAFBA’s data also highlighted how brokers are expecting financing demand to diverge across various industries, with the results showing a mixed outlook.
According to the findings, the healthcare industry is the most expected to see an increase in financing demand, with 40 per cent of respondents anticipating growth, showing a net positive sentiment of +38.
This was followed by a net positive sentiment of +29 for the media and telecommunications industry, with 32 per cent of respondents expecting an increase in demand, while financial services and agriculture showed positive trends with net sentiments of +26 and +24 (respectively).
However, negative outlooks emerged for the retail trade and recreation sectors, with net sentiments of -19 and -15, respectively.
Manufacturing and mining also had negative expectations, albeit less severe, at -5 and -3.
Brokers interested in contributing to the monthly survey in return for access to the survey results can sign up here.
About the Broker Pulse: Commercial Lending survey
The July 2024 Broker Pulse: Commercial Lending survey was conducted from 1–16 August 2024 and captured expertise and experiences from 123 commercial and finance brokers.
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