Appetite for external funding rises among SMEs – Atom

  • 07/11/2023
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Appetite for external funding rises among SMEs – Atom
More than half, 54 per cent, of commercial brokers have noticed an increase in demand for external funding from small to medium-sized enterprises (SME), a lender’s survey has reported.

Atom Bank’s Pulse survey for Q3 found that this was higher than the 48 per cent who cited the same in Q2. 

Some 43 per cent of respondents said this change was down to rising costs, while 36 per cent said it was due to growing business confidence. Around 18 per cent of brokers put this demand down to more product options. 

Atom Bank said this rise in appetite was reflected within its own business as it saw a 105 per cent increase in the value of quotes from Q2 to Q3, as well as a 65 per cent rise in enquiries through intermediaries. 

Property purchase was the most popular reason for taking out a loan among Atom Bank’s clients, accounting for 40 per cent of business. 

The lender attributed this to higher rents and more product options encouraging businesses to consider purchasing premises. 


More options available 

Some 58 per cent of commercial brokers said it was easy to access finance for their clients, but 42 per cent said they still faced difficulties. 

For 37 per cent of brokers, value for money and competitively priced products were the most important factor, while 27 per cent said ease of doing business and a “slick platform” were essential. A fifth of brokers said speed of efficiency and quicker time to completion mattered most. 


Borrower trends 

Some 53 per cent of brokers said demand for investment in commercial property had dampened alongside an increase in interest coverage ratios. A third suggested that there was not weakened demand, however, and instead said there were still some opportunities for investors. 

As for those noticing a drop in appetite, 56 per cent said this was happening in the retail space, 56 per cent said the residential investment sector was affected and 38 per cent said Grade A offices. Grade B and C offices were also said to be suffering weaker demand, according to 38 per cent of respondents, and this was the same for the industrial sector. 

Some 19 per cent said there was less investor demand in the care home sector. 


Consumer Duty 

Most commercial brokers do not think Consumer Duty will have a positive effect on their part of the market, as reported by 60 per cent of respondents. 

Despite this, 80 per cent said they “comfortably” met the deadline to implement the rules and 57 per cent said they focused primarily on changing their communications to improve customer understanding. 

David Castling (pictured), head of intermediary distribution at Atom Bank, said: “Despite some lingering economic and market uncertainty, it’s highly encouraging to see that SMEs’ appetite for external finance is trending upwards, with property purchase and business expansion dominating the reasons for this rising demand. 

“On the flip side, we’re still seeing a large chunk of broker respondents struggling to access the type of finance required by their clients, with many stating a lack of appetite from lenders, so this is a figure which must improve across the board.”  

He added: “As a lender, we are constantly evolving our offering in a bid to increase the number of small businesses we are able to support in the current economic environment. A key part of this is utilising tech efficiency to ensure that we can deliver speed, ease and certainty for our intermediary partners and their clients.” 

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