Over half of brokers report rising SME appetite for external finance in Atom Pulse survey
07 November 2023
Research conducted amongst commercial brokers reveals over half (54%) see a rising appetite from SMEs for external funding, up 6% from Q2 Pulse
Property purchase was the most common purpose for taking out a loan (40%) followed by business expansion (36%) and refinancing existing debt (27%)
Almost two-thirds (60%) of commercial brokers are yet to be convinced that the Consumer Duty rules will have a positive impact on the industry and their clients
Atom bank’s ‘SME Pulse’ survey for Q3 2023 has revealed that over half (54%) of brokers surveyed are seeing a rising appetite from SMEs for external funding, representing an uplift of 6% when compared to the Q2 findings (48%).
Breaking down the reasons for this increased appetite, the majority (43%) of respondents cited rising costs and over a third (36%) pointed to growing business confidence with just under a fifth (18%) citing more product options.
The increased appetite for external funding has been evident in the level of enquiries received by Atom over the course of the quarter. Atom has experienced a 105% increase in the value of quotes requested in Q3 (£1.26b) and seen a 65% uplift in the number of intermediary firms generating new business enquiries over this period. Even during some lingering uncertain economic conditions, this demonstrates SMEs ongoing commitment to strategic growth when backed by the right levels of lending support.
When it came to the most common purpose for taking out a loan amongst their clients, property purchase topped the charts (40%). A number of key factors are driving this demand, including heightened rents and more product options, which may tip the balance for some businesses to commit to purchasing premises rather than continuing on more costly longer-term rents.
Access to finance and business lending appetites
In findings which mirrored the Q2 ‘SME Pulse’ data, the majority of brokers (58%) said they were easily able to access finance on behalf of their clients. However, a large proportion (42%) still state that they were currently finding it difficult to obtain the finance their clients needed.
When looking for a lender, over a third (37%) of brokers felt that value for money and competitively priced products were the most important feature; Over a quarter (27%) valued ease of doing business and a slick platform over price, whilst a fifth (20%) look for speed of efficiency and quicker time to completion.
The results demonstrate that while price is obviously a key consideration, many brokers do value the service and support received from lending partners. Technology is playing a critical role in this, as the impact of automated decisioning and timely access to financial information will continue to have a major impact and influence over the commercial mortgage market moving forward.
Commercial Real Estate
The commercial real estate market has experienced many well-published challenges in recent times, in particular when it comes to office and retail space, with some investors exiting the sector altogether.
These challenges remained evident in the data which found that just over half of brokers (53%) are seeing a dampening of demand from commercial property investors in response to increased interest coverage ratios. However, on a more encouraging note, a third (33%) suggested this might not be the case to imply that some green shoots and opportunities may be emerging for investors.
When quizzed on which asset classes brokers are experiencing reduced demand from, over half of respondents felt that residential (56%) and retail (56%) had been affected, with over a third stressing that Grade A offices (38%) Grade B and C offices (38%) and industrial (38%) have seen reduced demand, with 19% citing care homes.
Consumer Duty
Consumer Duty has been high on the agenda of all firms across the industry for the past 12 to 18 months. However, the majority (60%) of commercial brokers are yet to be convinced that the Consumer Duty rules will have a positive impact on the industry and their customers.
Focusing on implementation, 80% of those surveyed reported that they were able to comfortably meet the 31 July Consumer Duty deadline. In terms of the actions taken by firms and advisers in meeting this deadline, well over half (57%) outlined that they had to focus on or change their communications to better support customer understanding.
David Castling, head of intermediary distribution at Atom bank, commented:
“Despite some lingering economic and market uncertainty, it’s highly encouraging to see that SME’s 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.
“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.”
For more information on Atom’s business loans, visit https://www.digitalmortgages.net/business/
