A growing sense of caution among small and medium-sized business borrowers is dampening the appetite for commercial finance, according to new data from Atom bank’s latest SME Pulse survey.
The findings suggest that economic uncertainty and higher inflation are tempering confidence, even as access to funding continues to improve.
The SME Pulse, which collates quarterly insights from commercial mortgage brokers, revealed a 7% drop in the number of brokers reporting increased demand for borrowing from SME clients in Q2 2025.
While nearly half (46%) of brokers said appetite was still growing, that figure is down from previous quarters. A further 49% saw no change in demand, up from 44%, and 5% reported a decline.
REASONS WHY
Of those brokers who observed a slowdown, three-quarters cited economic uncertainty as the primary reason. Heightened concerns about inflation were also evident, with the Consumer Price Index rising to 3.6% in the year to June – the highest since January 2024, according to the Office for National Statistics.
Tom Renwick, head of business lending at Atom bank, acknowledged the shift in sentiment. “The current economic climate, marked by persistent uncertainty, understandably is contributing to a perceived softening of demand among brokers,” he said.
“However, it’s crucial to highlight a key finding: a minimal number of brokers have reported an actual decline in demand. This distinction underscores the inherent robustness of the market.”
INFLATION
Half of those polled said they were personally concerned about the effects of continued inflation, with more than a third (35%) noting that their clients were becoming increasingly hesitant about new purchases or refinancing.
Despite the softening demand, property purchases remain the predominant reason SMEs seek finance. Nearly two-thirds (64%) of brokers identified acquisitions as the leading motive for borrowing, well ahead of business expansion (16%) and debt refinancing (14%).
Brokers also reported continued improvement in access to commercial finance. Just 20% of respondents said they were finding it difficult to secure funding for clients – the lowest level since Atom bank began the Pulse survey in 2023. This is being attributed in part to the broader range of lenders now active in the commercial lending space.
“It’s particularly encouraging to see access to funding improving,” said Renwick. “This is the strongest position brokers have reported since we launched the Pulse survey and shows that lenders are striking a better balance in delivering criteria which truly meets the needs of a broader number of SMEs.
“Nonetheless, that one in five brokers are still having issues shows there is a clear imperative to further open up funding avenues for quality SMEs.”
Trade concerns also featured in the survey. While nearly half (46%) of brokers said their clients were unconcerned about possible tariffs on trade with the US, around a quarter (24%) noted some anxiety among borrowers.
Conversations about the implications of recent trade deals with the EU, US and India were also becoming more frequent, with 45% of brokers saying their clients were discussing the potential opportunities and risks.
Meanwhile, the growing popularity of purpose built student accommodation (PBSA) is filtering through to the broker market. More than a quarter (28%) of brokers reported increased demand from property investors seeking to expand in this high-yield sector.
A similar proportion (22%) said PBSA now accounted for between 10% and 20% of their overall business.
In response to this demand, Atom bank has recently enhanced its PBSA proposition, offering more competitive terms and higher loan-to-value ratios than are typically available on comparable houses in multiple occupation (HMO) deals.
