Business lending up 27% in three months

Record volumes of commercial and business lending were written in the September quarter with smaller lenders leading the way.

1 December 2021

During the September quarter, the combination of commercial, business, and asset finance settlements under mortgage broking aggregator FAST Group surged to a record figure of $1.71 billion dollars during the September quarter, according to the aggregation group’s latest Business Lending Index. 

The dedicated quarterly report, which explores the volume of business lending originated through mortgage brokers, noted that this figure reflects a 27.3% increase compared to the June quarter. 

Compared to the same quarter last year – a period defined by declines in commercial and business lending – this new figure accounted for a 46.1% increase. 

However, this record figure was distinctively defined by commercial and business loan lending, accounting for a figure of $1.55 billion during this quarter – a 30.4% increase compared to the June quarter, and a 47.6% increase year-on-year. 

The report noted this included commercial investment and owner-occupier property as well as construction/development and working capital.

Asset finance over the September quarter marked a figure of $160.45 million – a 4% increase on the previous quarter and a 32% rise to 2020. 

As per the report, asset finance and equipment lending – such as cars/light commercial vehicles and yellow goods – have been directly impacted by supply chain disruptions, notably how a shortage of semiconductor chips is lengthening the delivery times of new vehicles.

By state, NSW dominated commercial lending, accounting for 49% of this past quarter (a figure of $601 million, marking a 45.2% growth year-on-year), with Victoria next at 24% ($368 million and 12.2% year-on-year). 

Asset finance was a more equitable figure, with Victoria reflecting 29% of lending activity ($46 million and 58.6% year-on-year), followed by Queensland at 27% ($43 million and 59.3% year-on-year), and NSW at 21% ($24 million and -20% year-on-year). 

Fast Group managing director Stephen Moore said: “The appetite for commercial property has been strong, especially for assets housing tenants and businesses that have been exempt from lockdowns.

“Warehouses, strata light industrial and petrol stations are among the properties that have become prime assets over the last 18 months.”

Rise of the smaller lender

While this quarter was largely defined by increasing settlement figures, it also heralded growth in smaller lender activity

According to this latest Business Lending Index, smaller lenders’ share of FAST Group’s total – which accounts for non-big four lenders – over the September quarter settlements was 42.1% – reflecting $720.72 million. 

But despite larger lenders again reporting greater settlements, this smaller lender figure was an increase from last quarter’s figure of 30% and year-on-year growth of over 105%. 

Comparatively, larger lenders have only reported a year-on-year increase over the same period of roughly 21%.

“Smaller lenders have promoted their faster turnaround times at a time when larger lenders have experienced bottlenecks in assessments due to rising demand and increased policies,” the report stated. 

“The rise of fintechs, neobanks and specialist lenders – the majority of which are utilising data to drive quicker outcomes – has provided brokers’ customers with increased alternatives and options to meet their individual needs.”

Mr Moore added: “The market has been exceptionally competitive, with properties transacting on tighter yields every month. 

“There has been an increase in smaller and non-bank lenders looking to build market share. We’ve seen a rise in new products and investments by lenders in tech and resources to sharpen their turnaround times to appeal to commercial clients.”

Brokers expecting commercial wave to continue

The report revealed a sense of optimism surging throughout brokers, namely around the “appetite for commercial property investment and refinancing” – with 52% of the brokers surveyed by FAST Group in June expecting to write an increased volume of deals in this sector. 

According to Loan Market Group, the survey explored the perspectives of 176 FAST Group members, including brokers as well as loan writers and business owners.

While only 16% of respondents noted that owner-occupier purchases accounted for a share of their activity, almost half (45%) of the brokers involved in this survey believed there would be growth in this sector over the near future, while 80% predicted a rise in finance for business acquisitions and growth “in the immediate term”. 

The report also noted that despite supply chain delays impacting new car delivery, 48% of brokers anticipated car and light commercial lending would be part of the wider economic recovery.

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