Image credit: SME South Africa
Nearly two-thirds (62 per cent) of commercial brokers have noted an increase in demand for external funding from SME borrowers, a lender’s survey showed.
The ‘SME Pulse’ survey from Atom Bank covering Q1 found this was notably higher than the 45 per cent of commercial brokers who cited rising demand at the end of last year.
Lower interest rates were listed as the main reason for increased appetite, as cited by 55 per cent of respondents. Business confidence was cited by 38 per cent of commercial brokers, while the responses regarding greater appetite for lending and improvements in lending policy were each cited by 21 per cent of brokers.
The main reason for SME borrowing was property purchase, accounting for nearly half of the loans taken out, brokers said.
This was up from a third of loans as cited by brokers in Q4. Atom Bank – which in January cut its commercial rates – said this pointed to confidence in the property sector.
A third of loans were used to refinance existing debt, up from 21 per cent in Q4, while 17 per cent were used for growth and business expansion.
Improved access to finance
Nearly a quarter of brokers said their clients faced difficulties when accessing finance, which was an improvement on the third who said so in the previous survey.
Atom Bank said this was still a “substantial number” of borrowers coming up against obstacles.
Nearly three-quarters of commercial brokers believe investors will take advantage of the state of the property market and competitive pricing this year.
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.”
He added: “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.”
Source: https://www.mortgagesolutions.co.uk/specialist-lending/2024/03/21/sme-appetite-for-external-funding-is-rising-commercial-brokers-say/