New research from Atom bank conducted amongst the commercial broker community has studied SMEs’ access to finance and what is driving small business owners to borrow amid the current economically challenging backdrop.

Atom’s first ‘SME Pulse’ survey revealed that while the majority of brokers (58%) said they were easily able to access finance on behalf of their clients, 42% stated that they were currently finding it difficult to get the finance their clients needed. This can often be down to institutionally funded specialist lenders finding wholesale funding lines problematic, or a ‘risk off’ approach seen from some high street lenders, the bank said.

Half of brokers felt the introduction of new technology could help improve SMEs access to credit. The most popular pieces of technology brokers think would be beneficial are instant agreement in principles (72%), automated eligibility decisioning (65%) and open banking (44%).

48% of brokers surveyed feel SMEs’ appetite for external finance is increasing, with the majority (59%) believing the main reason for this is a rise in business confidence. 53% stated the main reason SMEs are taking out a loan is for growth and business expansion, painting a more positive picture for UK business.

Atom’s recent experience backs this up, and since returning to sale at the end of April the digital bank has quoted over £0.5bn in new lending. Despite a turbulent economic backdrop, demand for finance still appears to be present, although Atom has seen customers taking a much more considered approach when selecting the right finance solution for them.

Equally, 16% of brokers surveyed do feel there has been a slow down in SMEs’ demand for external finance. Higher interest rates (93%) was perceived to be the main driver according to this group, alongside economic uncertainty (60%) and a decreased appetite from lenders (60%).

It comes as May saw corporate insolvencies in England and Wales jump by 40% year-on-year as businesses struggled with the hike in borrowing costs, a tight labour market and high energy bills.

The UK Government’s pledge to cut carbon emissions to zero by 2050 is shaping the face of commercial property moving forward. While the vast majority (71%) of brokers hadn’t seen a rise in their clients accessing finance to support net zero actions in the last six months, well over half (59%) do see the retrofit of the UK’s non-residential building stock as a potential opportunity for additional lending.

While most of the brokers surveyed were familiar with the government’s tightening of the rules around the Minimum Energy Efficiency Standards (MESS) regulations, which came into effect from 1 April, a quarter were unfamiliar with the changes and what they meant for clients, creating a risk that in the future these properties could become un-mortgageable.

Tom Renwick, head of business lending at Atom bank, said: “Looking at the businesses we have worked with, plenty of firms are looking to expand despite choppy conditions, and it’s up to lenders and brokers to provide easy access to the funding they need. The wider industry has lagged behind the technological leaps made in the mortgage market for a long period of time, but is crying out for a step change in terms of speed, ease and certainty. Automated decisioning and timely access to financial information to allow lenders to facilitate this are key to delivering the service that customers and brokers demand.

“Small businesses have had a difficult few years, so it’s encouraging that some of the brokers on our panel are seeing business confidence returning and more SMEs looking to expand. These businesses are the lifeblood of the UK economy, so we continue to work together with brokers to support and grow as many of the nation’s small businesses as possible.”