International conflict and interest rates concerning commercial borrowers as demand plateaus, reveals Atom bank SME Pulse

26 June 2026

Record proportion of brokers reporting unchanged levels of demand
International conflict and interest rate predictions highlighted as factors in cooling borrower appetite
A fifth of brokers seeing enquiries for small loans on a daily basis

Demand for commercial funding has tailed off, as international conflicts and interest rate expectations take their toll on business confidence, the latest SME Pulse from Atom bank has revealed.

Each quarter, Atom bank polls commercial brokers on their experiences over the previous three months and their forecasts for what lies ahead for the sector.

The latest edition of the SME Pulse*, covering the first quarter of 2026, revealed a levelling off in demand for external funding. More than half of respondents (54%) reported demand had remained the same, with a third, (down from 61% in the last edition) noting an increase in demand. This represents a record high for unchanged demand, and a record low for increasing demand, since the launch of the SME Pulse in 2023.

Higher interest rates and economic uncertainty were pinpointed as the main drivers of any fall in demand, each selected by the vast majority (86%) of brokers. However, of those noting an increase in demand, more product options (58%) and improved appetite from lenders (32%) was identified as the main causes.

Looking specifically at the ongoing conflict in the Middle East, almost half (49%) of brokers said their clients were concerned about the fallout from the issue, with less than a quarter (23%) unfazed. More than half (51%) of brokers also said that events like the conflict made it more difficult to advise clients on the outlook for external finance.

On interest rates, the majority (65%) of respondents said the revised outlook for increases in interest rates had directly led to a fall in demand for external funding.

The need for small loans

As part of the SME Pulse, brokers were polled on the state of the small loans space. Almost half (47%) of respondents reported receiving enquiries from clients looking to borrow between £100,000 and £250,000 on at least a weekly basis, while a fifth (19%) receive such enquiries daily.

Despite the clear need for such loans, brokers argued that competition could be better, with the majority (83%) of brokers calling for more lenders to enter the small loans market.

Atom bank has reduced the minimum loan size on its commercial mortgages twice this year, initially to £200,000 and then £100,000, in order to support a greater number of SMEs with more modest borrowing intentions.

Accessing finance

A consistent feature of recent editions of the SME Pulse has been improving accessibility, with the proportion of brokers reporting issues in accessing finance for their clients steadily declining.

However, the Q1 2026 edition saw a jump in those reporting issues, from 11% to 19%. While brokers highlighted the number of lenders active in the market, which is providing borrowers with more options, there were some who suggested the underwriting process has become more challenging, including the way affordability is assessed.

Tom Renwick, Head of Business Lending at Atom bank, commented:

“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.”