Lower interest rates drive demand as funding improves
Demand for commercial finance among small and medium-sized enterprises (SMEs) remains resilient even as economic uncertainty continues, according to Atom bank’s latest SME Pulse survey.
The quarterly survey, which gathers insights from commercial mortgage brokers, found that more than half (53%) reported stronger borrowing demand from clients in the first quarter of 2025. This was slightly down from 56% in the previous quarter.
Meanwhile, fewer advisers saw a decline in demand, with just 3% noting a drop. The proportion of brokers observing no change in client appetite rose by 5%, reaching 44%.
Among brokers who saw greater demand, 57% pointed to falling interest rates as the main factor — a marked rise compared to the previous quarter. Other influences included more active lending (32%) and improving business confidence (30%).
Property purchases remained the leading reason for taking out finance. However, the number of brokers citing property deals fell by six percentage points to 51%. In contrast, refinancing existing debt rose to 24%, and borrowing for business growth climbed to 23%.
For the first time, the SME Pulse explored conditions within specific commercial sectors.
In the modern industrial sector, 40% of brokers reported that their clients were feeling the effects of higher energy prices and supply chain issues. About 31% said their clients had not been affected.
Food and hospitality was another focus area. Here, 43% of brokers saw steady or rising borrowing demand. Restaurants and cafes showed the strongest growth, with 29% of advisers noting an increase, followed by 20% for pubs and bars, and 13% for food manufacturers.
The survey also found that brokers are facing fewer difficulties in securing funding for clients. Fewer than 25% said they struggled to access finance, an improvement from 2024 when roughly a third of brokers reported challenges.
Respondents credited wider lender participation and stronger appetite for lending as key reasons for the better environment.
“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,” said Tom Renwick (pictured), head of business lending at Atom bank. “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.”
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