Demand for business loans falls in June

Tuesday 10 July 2012

Article by Mozo

The demand for business loans among Australian companies fell sharply in June, despite cuts to national interest rates.

A new report released by National Australia Bank (NAB) has suggested that the number of organisations that wanted access to credit during the month stood at just 37 per cent, the Wall Street Journal reports.

This was a significant drop on the previous month, when 53 per cent of enterprises hoped to secure a loan from their bank.

These figures are particularly disappointing when you take the Reserve Bank of Australia's recent rate reductions into account.

It slashed the official cash rate by 50 points in May and then followed this up with another 25-point adjustment at the start of June, but it seems that this did little to encourage businesses to borrow more money.

Corporate loans are vital to firms that want to expand, but a lot of organisations are worried about taking on any extra debt while the global economy is still so shaky.

According to the NAB study, entrepreneurs down under are worried about the ongoing turmoil in the eurozone and this has caused them to adopt a more cautious approach to running their business.

Speaking to Bloomberg, NAB chief economist Alan Oster said: "Business confidence fell heavily in mining in June – down 18 to -14 points – likely reflecting the recent downgrade to the Chinese growth outlook and concerns about the stability of the euro, with both of these factors influencing the outlook for global commodity demand."

These latest findings tie in with Roy Morgan Research's new business confidence barometer, which showed that corporate sentiment was slightly down in June when compared to the previous month.

Industry communications director at the firm Norman Morris said that many banks and lenders have failed to pass on interest rate cuts to their loan customers in their entirety, which has put a lot of companies off.

Despite the tough trading conditions, business owners can still find competitive loan deals if they compare products online.

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Demand for business loans falls in June

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