Australian business credit demand took another dive in the June quarter, according to the latest research from credit scorer and data services provider, Equifax. Total applications for business credit declined by 1.3 per cent in the three month period compared to the same time last year, but the negative trend was not consistent across Australian states and business credit classes. Most of the country’s states – WA, Qld, SA and Tasmania – actually recorded increases of at least 5 per cent in overall credit applications but the net effect of their combined growth was more than nullified by significant declines in NSW and Victoria. Credit demand was particularly weak in NSW where loan applications fell by 7 per cent during the quarter compared to the same period in 2022. The Equifax data also identified an uneven pattern in demand between different classes of business credit. Applications for standard business loans fell sharply following big declines in NSW (-10 per cent) and Victoria (-7 per cent). However, these big falls were partly offset by a universal surge in demand for asset finance. WA recorded a 15 per cent surge in applications for asset finance while Victoria and NSW also recorded growth of 11 per cent and 3 per cent, respectively. Scott Mason, Equifax’s general manager of commercial and property services, said the overall decline in credit demand reflected the wider slowdown in economic conditions and could not be viewed as a collapse in business confidence. “The underlying drivers of negative loan applications in NSW are not clear,” he said. “However, the increase in capital expenditure evident in the strong growth in asset finance across the country is a good sign for the economy. “The solid increase in asset finance applications might also be a sign of supply chain pressures easing.” On a less positive note, Equifax analysis of ASIC insolvency data indicates that more small business owners, particularly in the construction sector, are experiencing financial stress. Mason said that the number of insolvencies was up 45 per cent in the June quarter compared to the same period last year, with May marking a post-Covid peak when 866 insolvencies were recorded. “We are increasingly seeing signs of stress on Australian businesses” he said. “This is evident not only in our commercial data, but also when we look at the people behind the business. “According to our data, sole traders and SMB owners across all sectors are seeing an increase in early stage (30+days) mortgage arrears rate - with operators in the construction sector hardest hit.” Equifax found that in the June quarter sole traders in the construction sector were 60 per cent more likely to be more than 30 days behind on loan repayments than the average consumer with no commercial relationships. Mason said that the number of mortgages in arrears by more than 90 days rose during the quarter. “The data suggests that a growing number of sole traders are putting money into the running of the business and not paying themselves what they previously would - and as a result, their mortgage payments are starting to lapse,” Mason said.