Demand for commercial finance has plateaued as businesses become more cautious amid geopolitical uncertainty and changing interest rate expectations, according to the latest SME Pulse from Atom bank.
The lender’s latest quarterly survey of commercial finance brokers found a record proportion reporting unchanged levels of demand for external funding during the first quarter of 2026, suggesting business confidence has softened after stronger borrowing activity in previous quarters.
More than half (54%) of brokers said demand for commercial finance had remained unchanged over the previous three months, while a third reported an increase in demand. The proportion seeing rising demand has fallen from 61% in the previous survey and is the lowest recorded since the SME Pulse was launched in 2023.
Higher interest rates and wider economic uncertainty were identified as the principal reasons behind weaker demand, with 86% of respondents citing each as a contributing factor. Among those reporting increased activity, 58% attributed this to a broader range of available products, while 32% pointed to improved lending appetite.
The survey also highlighted the impact of international events on borrower confidence. Almost half (49%) of brokers said their clients were concerned about the ongoing conflict in the Middle East, while 51% believed geopolitical developments were making it harder to advise businesses on the outlook for commercial finance. Just 23% said their clients were largely unconcerned.
Interest rate expectations also continue to influence borrowing decisions, with 65% of brokers saying the revised outlook for rates had directly reduced demand for external finance.
DEMAND FOR SMALLER LOANS REMAINS STRONG
Despite overall demand levelling off, the survey found continued appetite for smaller commercial loans.
Almost half (47%) of brokers said they receive enquiries for borrowing between £100,000 and £250,000 at least once a week, while 19% said they receive such enquiries every day.
However, 83% of respondents believe more lenders should enter the small loans market to improve competition and increase access to finance for SMEs.
Atom bank has reduced the minimum loan size available through its commercial mortgage proposition twice this year, first to £200,000 and subsequently to £100,000, in an effort to support businesses with lower borrowing requirements.
ACCESS TO FINANCE BECOMES MORE CHALLENGING
The survey also found that brokers are encountering more difficulties securing finance for clients than they were three months ago.
The proportion reporting problems accessing finance rose from 11% in the previous survey to 19% in the first quarter of 2026. While brokers acknowledged that lender choice remains relatively strong, some said underwriting standards had become more demanding, particularly around affordability assessments.
Tom Renwick, head of business lending at Atom bank, says: “The fact that the majority of brokers are reporting at least an unchanged level of demand is encouraging, showing that businesses are confident about pursuing their own ambitions.
“Nonetheless, it is striking that demand has plateaued, reflecting the impact that global events – and the knock-on effect they can have on interest rate expectations – can have on business borrowing. A period of stability would provide the certainty many businesses need in order to push forward with their growth plans.
“It’s also revealing to see just how significant demand is for small loans currently. For small loans to represent such a notable portion of commercial brokers’ enquiries is eye-opening, and given the shortage of lenders active in this space, there is a real danger that quality SMEs are having to postpone, if not abandon, pursuing opportunities.
“As an industry, we need to ensure these businesses are properly catered for, and have access to the loans which can have a transformative impact on their future prospects, even if the sums involved are more modest.”
