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The Banjo Barometer for 4Q24 released by non-bank lender Banjo Loans has revealed a “mood of survival” among Aussie small businesses through behaviours surrounding business loan activity and sentiment.
The report found that small- to medium-sized enterprises (SMEs) are “seemingly braced for ongoing weak business conditions” as overall loan applications fell 20 per cent quarter on quarter (the fifth consecutive quarterly drop) and 40 per cent year on year.
“It’s a sign that the nation’s sluggish economic growth is starting to bite, and that expectations of near-term interest rate and cost pressure relief have dimmed,” the report said.
Furthermore, the value of loans declined by 14 per cent during the June quarter and was down 34 per cent on the same period last year.
By industry, the largest declines in loan applications were led by SMEs in transport, postal, and warehousing (down by 54 per cent qoq and 62 per cent yoy); the construction sector (down by 23 per cent and 32 per cent); and professional scientific and technical services (14 per cent and 46 per cent).
Accommodation and food services and administrative and support services also experienced declines in loan applications both quarterly and yearly, down by 17 per cent/55 per cent and 15 per cent/72 per cent, respectively.
However, while overall applications have fallen, some notable businesses have ramped up their borrowing over the quarter.
Most notable was the financial and insurance services with loan applications increasing by 400 per cent quarterly and 100 per cent yearly, although these increases surged from a low base.
Additionally, retail SMEs increased their borrowing by 22 per cent over the quarter; however, this fell by 41 per cent yearly.
The Banjo Barometer report also revealed that the number of loans being declined rose by 11 per cent over the June quarter 2024 and by a staggering 87 per cent compared to the same time last year.
According to Banjo, an inability to service new loans was a key reason for declined applications, coupled with the presence of ATO debt and adverse existing credit.
“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.
“This most recent fall completes a full financial year of consecutive declines.
“While some sectors have shown intermittent signs of optimism, a mood of caution appears to have otherwise settled.”
With this being said, SMEs are staying in control of existing debt with the rate of loan arrears improving during the June quarter.
The report found that while most industries have managed their 30-plus day arrears, the retail sector continues to struggle.
Levels of repayments also worsened across businesses in transport, postal, and warehousing and accommodation and food services, however, still “appear very manageable”.
“With a low-growth economy forecast for some time still, a cut to interest rates still appears to be the circuit breaker required to re-enliven Australia’s SME sector,” the report said.
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