"Many SMEs are pressing ahead with growth plans this year and will be looking to raise funding to help them invest and meet their business growth aspirations."
It’s been a positive start to 2025 for the commercial finance sector. This area of the mortgage market has seen an uptick in demand over the last few months with business confidence among SMEs rising and enquiries relating to commercial property investment starting to increase.
Driving this growth has been renewed confidence in the economy as falling inflation and cuts to the Bank of England base rate at the end of 2024 saw small business owners seek out opportunities for growth.
This is great news for the commercial finance sector, which has experienced a challenging few years with many SMEs retreating from the market amid concerns over economic volatility, high interest rates and escalating business costs.
As we continue to head into 2025 however, it looks as if the tide is now turning. Figures from Atom Bank’s SME Pulse for Q4 2024 show that 56% of commercial finance brokers have reported an increase in demand from commercial clients looking to grow their business.
This is despite the fact that nearly three quarters of brokers said Chancellor Rachel Reeves’ October Budget, specifically the National Insurance Contributions hike, had a negative impact on their commercial clients’ business.
While recent figures show that inflation has recently risen to a 10-month high of 3%, it is encouraging to note that many SME owners continue to remain optimistic about their future prospects. This presents brokers with a great opportunity to explore this area of the market and help any small business clients who have signalled their intentions to grow in the year ahead.
There are a number of reasons why a small business owner may choose to take out commercial finance. These include expanding and growing their business by hiring new staff to increase productivity or to purchase or move to new and larger premises.
Other reasons include purchasing new equipment such as machinery and vehicles or investing in the latest technology in order to keep up with their competitors.
Many small businesses owners also use commercial finance as a means of buying stock and new supplies in order to capitalise on bulk-buying discounts as well as maintaining stock levels without straining cash supplies.
This can be especially beneficial in helping to manage cash flow and cover day-to-day expenses such as payroll or rent as well as helping to bridge the gap between those times when cash flow is stretched due to delayed payments from customers.
It can also prove a useful way to refinance debt by consolidating any existing loans into one payment, which again can improve cash flow, improve money management and help to manage unexpected costs such as emergency repairs or compliance costs.
One of the greatest challenges surrounding the commercial finance sector is the complexity involved in securing a loan. This area of the specialist lending market can be extremely complex, and the broad range of options available can make navigating this area of the mortgage market a mind-boggling experience for brokers new to the sector.
This is why working with a specialist lender or broker is integral to achieving a successful outcome. Norton Group has been around for 50 years, and our packager arm, Norton Broker Services is extremely well positioned to provide hands-on support throughout the entire advisory process.
Working with a specialist packager can also open up access to exclusive deals and competitive rates that are generally not available from high street banks. This is because the manual underwriting process offered by many alternative finance lenders allows for a more tailored approach to lending.
As a result, many of these lenders can be more creative when packaging deals and can offer more flexible commercial finance solutions to businesses that may not have been an option on the high street.
Given the challenges of the last few years, and despite reservations around the budget and the recent uptick in inflation, it seems many SMEs are pressing ahead with growth plans this year and will be looking to raise funding to help them invest and meet their business growth aspirations.
For brokers working with SME clients, this may mean exploring ways to develop relationships with specialist lenders and master brokers who can open up access to the commercial finance market and help them achieve their goals.
