Business borrowing posts post-GFC high

New data reveals business lending by local banks grew 0.6% in February, representing the strongest rise in business borrowing since the global financial crisis.

According to figures from the Reserve Bank, business credit recorded its strongest monthly growth in two years in February, after posting a flat result in January.

It’s believed a small degree of the lending data was due to borrowing by mining companies.

ANZ Banking Group led the turnaround, with loans to non-financial corporations rising by 2.2% to $72.9 billion, based on data from the Australian Prudential Regulation Authority.

NAB, the country’s biggest business lender, expanded its business loan portfolio by 1.5% to $97.8 billion.

Westpac Banking Corp, which has $64.2 billion of business lending, increased credit to business by 1.1% in February.

The Commonwealth Bank – Australia’s biggest home lender and small business financier – was the only bank to pull back on its lending in February, cutting its business loans by 0.2% to $57.8 billion.

Meanwhile, St George Bank announced last week it would pay business borrowers up to 0.5% of a loan, up to a maximum of $50,000, if they switched their business to the bank.

According to the RBA, total private sector credit rose by 0.5% in February, underpinned by demand for business loans, with Westpac predicting this line of credit to strengthen during 2011 and 2012.

“The Australian economic expansion is set to continue and businesses are likely to increase borrowings to fund an upswing in investment spending,” Westpac says.

“We interpret the February rise as the start of an improvement in business credit, albeit one that is likely to be bumpy from month-to-month.”

ANZ economists say strong capital expenditure growth, used to fund mining sector investments, is expected to increase demand for credit.

The RBA has warned business lending by banks could be restrained because the resources sector will tap credit markets directly.

But banks appearing before a Parliamentary enquiry last month, into access to finance for SMEs, said they were actively lending to small businesses.

However, small business organisations dispute the banks’ claims that they have eased up on lending standards.

Peter Strong, executive director of the Council of Small Business of Australia, says banks still apply prohibitive charges and interest rates on existing loans, and make new loans difficult.

“Even businesses that are looking for a very small loan are finding it difficult. They might simply be looking for a $10,000 loan to set up a website, which will grow their business, but the banks just won’t lend,” Strong says.