Equifax data shows falling demand for asset finance and trade credit is being countered by a rise in consumer credit demand from self-employed individuals and SMEs, the Equifax report Quarterly Commercial Insights shows.
Demand for vehicle finance among the SME and sole trader cohort was 14% higher in the December 2024 quarter compared with the same period in 2023, while demand for credit cards was up 13%.
“Concerningly, as the demand for auto loans and credit cards have increased, so have arrears for these products” Scott Mason, general manager commercial and property services at Equifax said yesterday.
SME and sole trader arrears for auto loans are 35% higher than they were in December 2023, and arrears rates are further elevated in key sectors.
Business owners in construction (+75%) and hospitality (+43%) sectors have seen a spike in auto loan arrears rates.
Construction and hospitality credit card arrears rates among SME owners have also doubled since December 2023.
“The concurrent increase in SME personal credit applications and arrears is a potential red flag” Mason said.
“SMEs and sole traders, particularly those working in industries facing high insolvencies and difficult market conditions, could be struggling to get commercial finance and instead are turning to personal lines of credit to support their businesses,” Mason said.