Survey reveals business access to credit is falling again

Businesses are finding it more difficult to obtain finance and believe accessing credit will be a critical issue during the September quarter, the latest Dun & Bradstreet Business Expectations survey reveals.

The survey shows restrictions on lending are continuing to hurt businesses, with 21% of companies reporting less access to credit in the previous quarter, and only 9% reporting greater or “moderately better” access.

And while the survey reports expectations for inventories and employment hit a six-year high in December, capital investment expectations have dropped down two points to 14 on the index.

About 18% expect to increase capital investment, with 4% expecting to decrease spending. Non-durable manufacturers and wholesalers recorded the highest expectations at 22 points.

The survey reveals 25% of firms expect to reduce debt in the next three months, while 16% intend to increase debt 55% plan to maintain current funding levels. The survey also shows 46% of executives are being negatively impacted by lagging business to business payment terms.

Additionally, selling price expectations are down four points to 19, with profits expectations down one point to 16. While sales expectations are “relatively high”, that index dropped 10 points to 23.

D&B said these sales expectations are having a clear effect on employment plans, with 9% of firms expecting to reduce employee numbers. About 14% expect to increase staff.

D&B chief executive Christine Christian says the findings are in line with previous reports suggesting the limited access is hurting businesses.

“The reduction in capital investment and inventories expectations is a sign that Australian executives believe credit will continue to be tight in the coming quarter,” she said in a statement.

“Given one in five businesses consider access to credit to be the most important influence on their business in the quarter ahead executives will be watching the RBA’s interest rate plans very closely in coming months.”

The survey reveals 35% of executives believe interest rates will be the primary influence on their business during the September quarter. About 24% believe wages growth to the primary influence, compared to 39% in March.

But despite the gloomy predictions, Christian says executives are more optimistic than during the last 12 months and the one major factor impacting businesses is the ability to survive despite limited access to credit.

“However despite falls across a number of indices Australian executives have generally improved their outlook in 2010. Expectations have improved overall since the September quarter 2009.”

“The critical factor now is how significantly tightening financial conditions will impact the growth plans of Australian firms and what executives will do to address these challenges.”