In a recent study by Atom bank, titled ‘SME Pulse’ for the first quarter of 2024, it was found that a growing number of small and medium-sized enterprises (SMEs) are looking towards external financing. According to the survey, almost two-thirds (62%) of commercial brokers have observed an increased appetite among SME clients for such financing, a considerable rise from the 45% reported in the previous quarter.
This surge in interest is attributed to several factors, notably lower interest rates, which 55% of brokers identified as the primary driver, followed by rising business confidence at 38%. The survey also noted a greater willingness from lenders and improvements in lender policies, each cited by 21% of respondents, as contributing to this trend.
Property purchases have emerged as the leading motive for SMEs seeking external financing, representing nearly half of all loans brokered. This marks a significant shift from the last quarter of the previous year when property-related loans accounted for a third. This trend underscores a broader sentiment among businesses that the current market conditions offer a favorable opportunity to invest in commercial premises.
Refinancing existing debt is also on the rise, now accounting for nearly a third of all SME loans, up from 21%, overtaking growth and business expansion efforts, which constitute 17% of the motivations for borrowing.
The survey highlights a positive trend in accessibility to SME funding, with a reduction in the number of businesses facing difficulties securing loans. While nearly one in four businesses still encounters challenges in accessing funding, this is an improvement from the previous quarter, indicating a gradual easing of borrowing constraints.
Looking forward, commercial brokers anticipate continued interest from investors in the property market, encouraged by competitive pricing and the expectation that the market may have reached its lowest point. Approximately 73% of brokers expect this trend to persist into 2024, suggesting a robust outlook for commercial property investments.
David Castling, head of intermediary distribution at Atom bank, said: “2023 was undoubtedly a difficult one for commercial borrowers, but our latest Pulse survey shows that attitudes are changing, with SMEs recognising the chance to take advantage of lower interest rates than were available last year.
“That property purchase has become a more common driver for SME borrowing is a reflection not only of the borrowing costs, but also the pricing of commercial premises, which have taken a hit in recent times. There are increasing opportunities for businesses to secure the perfect home for years to come, and at an attractive price.
“Despite the general positivity among brokers, it’s notable that one in four SMEs still experience difficulties in accessing the funding they require. Small businesses are hugely important to the economy, but they can only thrive if they can raise funds when necessary. That is why it’s so crucial for brokers to work with lenders who are genuinely committed to this sector, with the products and processes in place to provide swift funds and certainty to SME borrowers.”
