Brokers seeing demand for business borrowing grow, despite economic challenges
The majority of commercial mortgage brokers are seeing growing demand for external funding from their commercial clients, despite the ongoing economic uncertainty, the latest SME Pulse survey from Atom bank has revealed.
The SME Pulse is a quarterly poll of commercial brokers, covering their insights and expectations for the market, carried out by Atom bank, the UK’s highest rated residential mortgage lender and savings bank on Trustpilot.
The SME Pulse for Q1 2025 revealed that more than half of respondents (53%) said they were seeing an increased appetite for borrowing among their clients, though this was down from the last edition of the survey (56%) in Q4 2024. There was also a drop in the proportion of advisers reporting a reduced borrowing appetite, which fell to around 3% of respondents.
Instead, the proportion of advisers reporting unchanged demand from SMEs increased by 5%, reaching almost half (44%).
Of those experiencing increased appetite from business clients, lower interest rates are a big driving force. More than half (57%) of respondents cited the reduced cost of borrowing as the reason appetite for commercial finance has grown, a substantial rise from the last survey and far ahead of other major factors like greater appetite from lenders (32%) and business confidence (30%).
While property purchase remains the most common reason for borrowing, the proportion of brokers citing this factor fell by 6% to 51%. In contrast, refinancing existing debt rose by 6% to 24%, while growth and business expansion increased by 5% to 23%.
Supporting the modern industrial sector
For the first time, brokers were asked about their insights into specific commercial sectors.
Brokers active in supporting clients in the modern industrial sector were questioned on the effects of rising energy costs and supply chain disruptions. Two fifths (40%) of brokers said they had seen these factors impact their clients, while fewer than one in three (31%) said they had seen no such impact.
Another important sector is food and hospitality, with more than two-fifths of brokers (43%) seeing unchanged or increasing demand for borrowing from clients active in this space. Restaurants and cafes were the most sizeable cohort, with just under a third (29%) of advisers reporting a rise in demand, ahead of 20% for pubs and bars, and 13% for food manufacturing.
Improving access
The latest SME Pulse survey suggests that access to commercial funding is becoming easier.
Fewer than one in four brokers said they were currently finding it difficult to access funding for their clients, a significant improvement from much of last year when around one in three brokers were experiencing challenges.
Brokers pointed to a wide range of lenders in the sector, as well as greater appetite for lending, for this improvement.
Tom Renwick, head of business lending at Atom bank, commented: “It’s enormously encouraging that so few brokers in our latest SME Pulse are reporting a drop in demand from their business clients, despite the various economic headwinds they have faced at the start of 2025. This shows the level of confidence among British businesses at the moment, and suggests they believe this is the right time to raise the funds needed to support their growth plans. It will be interesting to track whether the introduction of trade tariffs by the US, and the subsequent market turmoil, has any impact on their plans in future editions of the Pulse survey.
“It’s also good to see that access to funding is becoming easier. While it’s disappointing that a quarter of brokers are experiencing issues in securing the funds their clients need, the sharp drop reported from Q4 2024 suggests that lender appetites are improving.
“It remains crucial for lenders to adapt their propositions to better suit the needs of business borrowers where possible. We’ve had a tremendous response to our introduction of a simplified stressed interest rate on commercial lending, a move that opens up the potential for businesses to access larger loan amounts. If businesses are to capitalise on the opportunities open to them, then they need more tangible support from commercial lenders.”