Brakes applied to business as market dwindles

Media release
Brakes applied to business as commercial credit market dwindles

13 November 2008 - The impact on New Zealand businesses is becoming more sharply defined as the global economic crisis deepens, with commercial defaults soaring and credit inquiries dropping according to the latest statistics from Veda Advantage, New Zealand’s largest credit information provider.

The statistics detail the credit inquiries and defaults for businesses lodged by credit providers such as telcos, banks, finance companies and trade credit providers onto the Veda Advantage credit bureau. Veda Advantage reports that the total number of commercial defaults for the third Quarter 2008 was up 47% on the third Quarter 2007, with finance companies (150% increase) and trade credit providers (132% increase) posting the most significant increases in defaults.

Veda Advantage New Zealand Director John Roberts says, “We conducted a study into the economic mood of the business community a couple of months ago, and found that around a quarter of smaller businesses were finding debt levels harder to service than a year ago. The default figures recorded on our Bureau for the third quarter would suggest that the stress on business is more significant than the survey findings indicated.”

Commercial credit inquiries meanwhile, dropped by 9% on the same period last year. Banks represented the largest drop in credit applications with a 19% decrease, while finance companies reported a 16% drop in inquiries.

Mr Roberts says, “The downward trend in commercial enquiries is very similar to what we are witnessing within the consumer credit market. This is clearly an uncertain time for the economy; businesses are wary about saddling themselves with more debt, and there will have been an attitude of “watch and wait” preceding the recent election which may also have been a factor. 62% of the businesses we surveyed in our recent study said they were optimistic about the impact a change in government would have on their business, so it will be interesting to see whether there is any recovery in the credit market following the election result.”

ENDS

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