# Investor appetite ignites as SMEs tap into lower borrowing costs

- Link: https://www.directorstalkinterviews.com/investor-appetite-ignites-as-smes-tap-into-lower-borrowing-costs/4121195034
- Published: 2025-05-02T10:57:00+01:00
- Author: Amilia Stone

UK small and medium-sized enterprises (SMEs) are seizing the opportunity presented
by reduced interest rates, leading to a notable uptick in demand for external funding.
This shift signals a promising landscape for investors, as businesses look to refinance,
expand, and navigate the evolving economic terrain.

A recent SME Pulse survey conducted by Atom Bank for Q1 2025 reveals that 53% of
commercial mortgage brokers have observed an increased appetite for borrowing among
their SME clients. This marks a slight decrease from 56% in Q4 2024 but remains 
a strong indicator of sustained interest. Notably, only about 3% of advisers reported
a reduced borrowing appetite, while 44% observed unchanged demand.

The primary catalyst for this heightened borrowing activity is the reduction in 
interest rates. Over half (57%) of brokers attribute the surge in demand to the 
lower cost of borrowing, a significant rise from previous surveys. Other contributing
factors include increased lender appetite (32%) and improved business confidence(
30%).

While property purchases remain the leading reason for borrowing, accounting for
51% of cases, there’s a noticeable shift towards refinancing existing debt and funding
business expansion. Refinancing has risen by 6% to 24%, and growth-related borrowing
has increased by 5% to 23%. This diversification in borrowing purposes indicates
a strategic approach by SMEs to strengthen their financial positions and pursue 
growth opportunities.

Sector-specific insights from the survey highlight varying impacts of external factors.
In the modern industrial sector, 40% of brokers reported that rising energy costs
and supply chain disruptions have affected their clients. Conversely, the food and
hospitality sector shows resilience, with 43% of brokers noting unchanged or increasing
demand for borrowing. Restaurants and cafes lead this trend, with 29% of advisers
reporting a rise in demand, followed by pubs and bars (20%) and food manufacturing(
13%).

Access to commercial funding has also improved, with fewer than one in four brokers
currently finding it difficult to secure funding for their clients. This is a significant
improvement from the previous year when about one in three brokers faced challenges.
The broader range of lenders and increased lending appetite contribute to this positive
development.

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