62% of brokers with SME clients have seen an increase in appetite for external financing,  according to Atom bank’s ‘SME Pulse’ survey for Q1 2024.

This contrasts to the 45% of brokers who reported increasing appetite among SMEs in the final Pulse of last year.

SMEs are embracing the opportunities presented by more favourable pricing, according to commercial brokers, despite the broader economic challenges facing the UK.

Lower interest rates (55%) was the most dominant factor in that increased appetite, brokers reported, ahead of business confidence (38%), greater appetite from lenders and improvements in lender policy (both 21%).

Purchasing a property has become a more powerful driver for SME borrowing, accounting for almost half of the loans taken out by businesses, brokers said. That is a notable increase from Q4 when it was the purpose of a third of SME loans, and suggests businesses across the country view now as a positive time to secure a home for their activities for the future.

Refinancing existing debt has also grown in popularity, representing nearly a third of loans (up from 21%), ahead of growth and business expansion (17%).

Almost one in four said their business clients had experienced difficulty in accessing funding, an improvement from the previous Pulse when almost a third reported accessibility problems.

In addition, brokers expect investors to continue to look for opportunities as a result  of more competitive property pricing in 2024. 73% of commercial brokers said they expected investors to take advantage of the property market bottoming out 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.

“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.”