Brokers field daily £100k enquiries with nowhere to place them
UK lending to small and medium-sized enterprises (SMEs) grew at its fastest pace in years during the first quarter of 2026, yet commercial brokers say the smallest borrowers are finding it harder than ever to get a deal done.
The contradiction sits at the centre of Atom bank's latest SME Pulse survey, which polls commercial brokers each quarter on market conditions and their outlook for the months ahead.
UK Finance's latest Business Finance Review recorded a 16% year-on-year rise in gross SME lending in the first quarter of 2026, reaching £5.3 billion, the highest quarterly total since the end of COVID-era loan schemes, with lending to the smallest businesses up 51% on the year.
UK Finance noted, however, that loan applications dipped in March after a strong start to the year, a pattern it compared to the period following the invasion of Ukraine in early 2022, and cautioned that renewed uncertainty from the Middle East conflict could weigh on business confidence in the months ahead.
Set against that backdrop of expansion, Atom's findings tell a narrower, more strained story. Almost half (47%) of brokers said they receive enquiries for loans between £100,000 and £250,000 at least weekly, while 19% said such requests land daily. The vast majority (83%) called for more lenders to enter the small loans space.
Where the headline numbers and the broker reality part ways
That gap is one brokers on the ground recognise well. Ash Ajaz, director at Focus Finance Solutions, said commercial borrowers have endured a lean stretch, with only a handful of lenders willing to look at the space, and mainly at the larger end of the market.
Deals below about £100,000 to £150,000 have been the hardest to place, he said, because the choice of lenders willing to write such tickets has been very limited, and those that did offer products often came with strict minimum loan sizes and tight parameters.
That reluctance fits within a longer-running pattern. Bank of England figures show SME loans have fallen from 12% of GDP in 2011 to 6.5% in 2026, a reduction of roughly half over 15 years, while real estate SMEs now account for 51% of all loans to small businesses, up from 39% a decade ago.
Raoul Ruparel, director for growth at Boston Consulting Group, described the decline as a structural problem for the UK economy rather than a sector-specific issue, and HSBC's head of corporate and institutional banking, Michael Roberts, told a House of Lords committee that capital requirements are five times higher for direct SME lending than for funding the private credit groups that lend to the same businesses, a dynamic that helps explain why smaller, less standardised loans are less attractive to write.
Atom bank has responded to that gap by cutting the minimum size of its commercial mortgages twice this year, first to £200,000 and then to £100,000.
"It's also revealing to see just how significant demand is for small loans currently,” said Tom Renwick, head of business lending at Atom bank. “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." Renwick added.
Brokers work harder to bridge the same gap
NACFB's Intermediary Market Outlook 2025/26 found its members arranged £33 billion in SME lending in 2025, a 25% annual rise, with brokers considering an average of six lenders per deal and a quarter of clients having been declined elsewhere before being successfully funded.
NACFB head of communications and advocacy Kieran Jones said the data shows brokers handling a more complex funding environment through careful structuring and regional reach rather than simple deal volume — a description that lines up closely with what Atom's survey found at the small-ticket end specifically.
Wider demand stalls as conflict and rates weigh on confidence
Beyond the small loans segment, demand for commercial funding more broadly has also cooled.
Just over half (54%) of brokers reported unchanged demand for external funding in the first quarter of 2026, a record high since the survey launched in 2023, while only a third reported an increase, down from 61% the previous quarter and a record low for the series.
Higher interest rates and economic uncertainty were each cited by 86% of brokers as the main drivers behind falling demand, while among brokers who did see demand rise, 58% pointed to a wider choice of products and 32% to improved lender appetite.
The Middle East conflict featured prominently as a source of client unease, with 49% of brokers saying customers were concerned about its fallout, compared with 23% who said clients were unconcerned.
Just over half (51%) said events of this kind have made it harder to advise clients on the outlook for external finance, and 65% said the revised outlook for interest rate rises had directly contributed to the fall in demand.
A similar split between aggregate growth and small-borrower strain showed up in UK Finance's Q3 2025 Business Finance Review, which found loans to the smallest firms, those with turnover under £2 million, up 21% in number and 25% in value year-on-year, even as the average size of new loans fell 12% to just under £250,000.
An Asset Advantage sales director, commenting on those figures at the time, called on lenders to move beyond restrictive risk appetites and be more open-minded so brokers have the tools they need to support SME clients.
Access to finance had been improving steadily across recent editions of the SME Pulse, but the latest quarter recorded a setback: the proportion of brokers reporting difficulty accessing finance for clients rose to 19%, up from 11% previously.
Brokers attributed part of the change to a wider pool of active lenders giving borrowers more options, even as some described the underwriting process, including affordability assessment, as becoming more demanding.
"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,” Renwick said.
“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," Renwick added.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
