Asian businesses brace for stricter lending standards— survey

Over half of respondents said that lending standards will become more restrictive.

Asian businesses expect stricter lending standards for the remainder of 2024 compared to 2023, according to a survey by consulting firm AlixPartners.

Of 200 respondents— consisting of lawyers, investment bankers, lenders, sponsors, financial advisors, and other industry executives in Asia— over half (52%) expect lending standards to become more restrictive compared to the previous year, a 20 percentage point (ppt) increase compared to 2023.

In particular, 52% of respondents expect lenders to be more likely to proactively alert borrowers to take appropriate actions against risks, higher than the just 31% who said the same in 2023.

Companies expected to experience increased pressure in both commercial and private lending spaces. 

Traditional banks are exercising greater caution by reducing their engagement with customers deemed higher risk, according to AlixPartners.  This suggests a recalibration of risk appetites to address challenges amid the current economic cycle.

A majority of 86% of respondents anticipate disruption to their business.

About 9 in 10 of respondents said that these pressures will affect company profitability, with over 1 in 3 (39%) expecting these pressures to be greater than in 2023.

The biggest drivers of pressures are said to be high material costs (53%), high interest rates (49%), and high labor costs (49%).

The impact of the COVID-19 pandemic still continues to linger even in 2024, with over 1 in 3 (36%) of respondents saying incomplete market recovery post-COVID as a pressure.

Respondents said that the US elections in November 2024 and geopolitical tensions are impacting the flows of international capital.

“A change in political direction could also increase friction regarding global trade and tariffs, driving higher levels of distress and underscoring the importance of careful cash management for businesses amid uncertainty,” AlixPartners said in a press release on the survey’s results.

Despite these, respondents in Asia are hopeful for a rebound, with almost 3 in 4 (74%) expecting overall corporate profitability to improve in Asia, higher than last year’s 39%. 

Almost all respondents (95%) reportedly anticipate the availability of debt financing and capital to remain flat or increase in the next 12 months. 

Of note, nearly half of respondents (49%) expect the availability of capital in Asia to increase compared to the previous 12 months, significantly higher than the 28% from global survey data, AlixPartners said.