According to Atom Bank’s SME Pulse, which is a quarterly poll of commercial brokers, its survey for Q2 2024 found that 84% of brokers said they were seeing a rise in business confidence due to falling inflation and expectations of a base rate cut in the near future.

Business leader confidence is cited as the biggest driver for demand by 65% of commercial brokers, moving up from the second position in the previous quarter.

This was followed by greater appetite for lenders at 37%, increased costs at 28% and more product options at 26%.

Lower interest rates were only mentioned by around 16% of intermediaries, a fall from the top slot in the first quarter of this year.

Almost half of respondents said the main reason for borrowing was buying a property, with 28% raising funds to refinance existing debt and 21% looking to external financing to help fund growth and business expansion.

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A third of commercial brokers financing it hard to place SME cases

Around one in three commercial brokers said it was difficult to access financing on behalf of their clients, a rise of 8% on the previous survey.

Individual responses from brokers suggest that lenders are tightening criteria, being more in-depth with underwriting and overpricing comparative to risk factors.

Around 69% of commercial brokers said they were not seeing a problem, but the figures suggest there are a “substantial number of clients experiencing problems securing finance”.

Approximately three in five commercial brokers said that there was a rise in interest from new businesses looking for external funding.

However, they noted that this can be challenging as many lenders will not look at start-ups, especially high street banks.

This echoes an analysis done earlier this year by Specialist Lending Solutions, which suggested that while lenders were increasing their appetite in the space, there were still some under-served areas.

David Castling, head of intermediary distribution at Atom Bank, said: “It’s really encouraging to see a further increase in the number of brokers seeing growing demand from SMEs for external funding.

“It’s clear that business owners are feeling more confident about their prospects for the future, and want to push on with their growth plans and establish themselves for the future. Notably, lower interest rates are reducing in importance for borrowers – it’s their confidence and keenness to grow that is driving activity, rather than the cost of funds.”

He added: “Access to much needed funds remains a concern, however. Growing numbers of brokers are finding it harder to arrange finance for their clients, a situation that can be more pronounced for start-ups rather than those with a long track record.

“It is crucial that brokers work with lenders who see the bigger picture and will consider their SME clients on their true merits, irrespective of how long they have been in business.”