More than half (53%) of commercial mortgage brokers have seen an increased appetite from their commercial clients for external funding, Atom bank has found.

The firm’s latest SME Pulse survey for Q1 2025 revealed that this figure has fallen slightly from the last edition of the survey in Q4 2024, when 56% of brokers recorded increasing appetite for external funding in the commercial sector.

Atom bank also found there was a 3% quarter-on-quarter drop in the proportion of advisers reporting a reduced borrowing appetite.

Of those experiencing increased appetite from business clients, Atom said that lower interest rates are a big driving force.

Fifty-seven per cent of respondents cited the reduced cost of borrowing as the reason for commercial finance appetite increase.

This was ahead of greater appetite from lenders (32%) and increases in business confidence (30%).

Head of business lending at Atom bank, Tom Renwick, said: "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.

"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."

While property purchase remained the most common reason for borrowing, the proportion of brokers citing this factor fell by 6% to 51%. In contrast, refinancing existing debt rose by 6% to 24%, while growth and business expansion increased by 5% to 23%.

For the first time in the survey, brokers were asked about their insights into specific commercial sectors, including the effects of rising energy costs and supply chain issues.

Two in five (40%) brokers said they had seen these factors impact their clients, while 31% said they had seen no impact.

Furthermore, less than a quarter of brokers said they were currently finding it difficult to access funding for their clients, which Atom has described as a "significant improvement" on last year.

Renwick concluded: "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.

"It remains crucial for lenders to adapt their propositions to better suit the needs of business borrowers where possible. We’ve had a tremendous response to our introduction of a simplified stressed interest rate on commercial lending, a move that opens up the potential for businesses to access larger loan amounts. If businesses are to capitalise on the opportunities open to them, then they need more tangible support from commercial lenders."

---