Delay in vaccine rollout could mean reduced demand for finance

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    A delay in Australia’s COVID-19 vaccination rollout could mean a reduced demand for finance from small to medium enterprises as business leaders wait to see whether more lockdowns and snap border closures will occur. Those were the words of CreditorWatch CEO Patrick Coghlan. He told MPA that a lot of companies are still in a “holding pattern” – something he expects to continue over the next six months.

    “It seems to me that the economy and transaction accounts, savings accounts, business and consumer are flush with savings at the moment, so I don’t think there’s going to be a huge demand for finance in the coming six months,” he said. “Until the best part of the population has been vaccinated, the fact is that there could be border closures and there could be lockdowns.

    “I think people are still wary of that. Until they’ve got that confidence in the population and that (vaccination) taking place that there will be a reduced demand for finance.”

    Read more: Securing finance for SMEs

    All in all, the economy is showing strong signs at the moment; CreditorWatch’s March Business Risk Review showing the number of payment defaults has fallen for five consecutive months with the probability of default remaining low across all industries. While the probability of default is higher than it was pre-COVID, it’s certainly not as high as anyone expected, said Coghlan.

    “Where we find ourselves at the moment wouldn’t have been on anyone’s best case scenario list through 2020 so we’re in a very fortunate position, very positive economic position and I think we can really look forward to taking advantage of that going forward,” he said. “A small caveat there is that we will certainly see a small increase in defaults, court actions and administrations, however, we’re 50% down on where we were pre-COVID so that would only be an increase back to hopefully just normal levels.

    “The question will be when it starts and how long it goes for.”

    Read more: Administrations surged 61% in February

    Despite Jobkeeper ending a fortnight ago, CreditorWatch hasn’t seen a big increase in defaults and administrations over the first two weeks of April, leading Coghlan to anticipate “a consistent increase rather than a big step up or a tsunami.”

    He said brokers played an important role as “trusted adviser” to SME clients and could best help them by understanding where they were at in terms of their liquidity position and educating them on the most relevant legislative changes.

    “If you can educate the customer, it gives them much more confidence to take more risk rather than just sitting out of the risk game altogether,” he said. “Ultimately, if they’re willing to get involved, they’re more likely to actually take finance on.”

    Kate McIntyreKate McIntyre is an online writer for Mortgage Professional Australia. She has a wealth of experience as a storyteller and journalist for a range of leading media outlets, particularly in real estate, property investing and finance. She loves uncovering the heart behind every story and aims to inspire others through the artful simplicity of well-written words.
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    Original Article