Boom, bust, or balance?
Brokers’ cautious optimism for Q4
Introduction
Charissa Chang Head of Broker Sales – Commercial Mortgages (North and Midlands) at Allica Bank
Every second quarter, we survey a panel of the brokers we work with.
It’s an opportunity to check-in with our network, hear what’s on their minds and get a temperature check for the wider market.
At the start of the year, we published the results of our Q4 2024 survey in our 2025 SME Market Outlook. I wrote that “brokers are predicting a more stable year”. That’s been true… but not entirely. When the results of our latest Q2 survey of 210 brokers landed in my inbox, I was struck by two things.
Firstly, some really positive numbers. Secondly, some really big structural challenges.
Brokers are - cautiously, sensibly - optimistic about the coming months. What form that takes and in what measure, we don’t know. What we do know is that broker sentiment is often a leading indicator for growth and productivity.
As you’ll learn over the coming pages, the expertise in the broker community is going to be vital on the UK’s path back to growth. Access to finance remains a huge blocker for many SMEs and, without a switched-on broker to help them, leaves a lot of opportunities unmet.
Brokers won’t be able to reboot the economy on their own, but they will have a critical role to play.
Boom, bust, or balance?
Commercial mortgages
In Allica’s latest survey of commercial mortgage brokers:
49% have seen an increase in application volumes
31% say it’s business as usual 20% report a decrease in applications
The data paints a picture of fairly widespread stability - either just beginning or well-established and being used as a platform for growth.
The most encouraging point, however, is in the reasons behind these healthy volumes. Property investments and refinance are tied as the primary reasons for commercial mortgage applications. Owner-operator purchases are third and business investments are fourth. Way back in fifth place (with a significant margin between it and fourth) is seeking finance to stay afloat.
For those brokers that saw fewer applications, the three leading reasons they cited were rising costs delaying investments, uncertainty around interest rates, and affordability.
Since the start of 2025, one in 20 brokers have seen application volumes increase by more than
25%
Businesses are ready to take opportunities for growth and investment, but some are being held back by borrowing and operating costs.
We also asked brokers for some more qualitative insights into what’s left of 2025. The grey areas and nuances are always fascinating and these responses highlighted them.
Where commercial mortgage brokers expect growth
Four potential growth areas stood out:
Brokers are bullish on demand for two specific products: commercial mortgages (especially owner-occupied units and semi-commercial properties) and refinance. On refinance, brokers feel this will be driven by existing lenders not renewing facilities or clients restructuring debts with more competitive rates.
Many brokers shared their hopes about a widening of lenders’ appetites. Specifically, our brokers told us they hope more lenders will enter the market, bringing more flexible terms and products to the table. Competition breeds competition, so this could be a boon for established businesses and brokers alike.
Lastly, automation (including AI) is going to continue streamlining processeshopefully to positive effect. On one hand, brokers feel that automation should improve efficiency with processing. On the other hand, computerised rejections can be hugely frustrating. The message was loud and clear: automation and AI can be transformative, but we can’t let them remove the human factor in lending.
Where brokers foresee challenges and holdups
There are always bumps in the road ahead and we won’t be able to spot all of them in advance. Our brokers shared some of their biggest concerns for the coming months, which also fall into four categories.
Two governmental issues came up: taxation and policy changes. Almost all businesses are having to adapt to the increase in Employer National Insurance and its broader impacts. Then, eyes are also on policies including the Modern Industrial Strategy, The Economic Crime
& Corporate Transparency Act and the small business-focused Plan for Change.
Interest rates are always a hot topic. Despite downward movement in the Bank of England’s base rate this calendar year (three 0.25%pt reductions), brokers tell us that some borrowers need further cuts before they can comfortably borrow for growth projects.
Lastly, there are some doubts about high street lenders. Brokers expect to see the big-name lenders lose market share, pointing to a perceived lack of flexibility and slow processes. Since 2021, challenger banks and lenders have provided the majority of finance to SMEs. This looks like it’ll only continue.
Pulling the whole picture together - the good and bad, the pros and cons, the opportunities and the challenges - we can see a healthy blend of pragmatism and optimism among brokers.
Application volumes are, overall, steady or increasing and a lot of our broker panel predict that to continue to the end of the year. If that comes to pass, it seems that much of the lending will spread across the market, rather than being pooled with the biggest lenders.
Ultimately, the proof will be in the numbers. None of us have a crystal ball, but we do have access to a panel of brokers working with established businesses across the country. When they talk, we listen.
Boom, bust, or balance?
Bridging finance
Our brokers in bridging finance also report similarly interesting and positive data. Growth seems to be on the agenda for those seeking bridging loans, with 45% of brokers reporting growth in loans for investments and 44% for light/medium refurbishments. Following those leading categories, 37% reported an increase in funding for development projects and 35% for commercial bridging loans.
While there is a clear variety of projects, growth is the thread that stitches all of these plans together.
We also asked our bridging finance brokers about their expectations for the rest of 2025.
WHICH BRIDGING FINANCE PURPOSE HAVE YOU SEEN THE MOST GROWTH IN RECENTLY?
Areas of growth
Our brokers predict a strong end to the year. Firstly, they expect demand and volumes to increase – especially for fast access to money, refinancing and property purchases. This tracks with the fact brokers say their clients see bridging finance as quicker and easier than traditional bank lending.
Re-bridging and short-term finance are also on brokers’ radars, as these offer flexible options for restructuring.
An interesting one to watch is the use of bridging by younger investors, which many brokers think will develop as older landlords begin to exit the market.
The headline is more applications, more completions and more activity.
Areas that need attention
It’s not all sunshine and rainbows, of course. Our brokers pointed to four key issues they want to mitigate in the last few months of the year.
Market saturation. Many brokers fear there are too many lenders competing, which may drive down pricing and margins.
Perception of cost and risk. Several brokers said clients still see bridging as expensive or risky. Old habits die hard and brokers are still fighting this battle.
Political and economic uncertainty. As with commercial mortgage brokers, concerns around policies, interest rates and rising business costs show up here, too.
Shift to term loans. Some clients naturally prefer longer-term options, if and when available.
Areas of uncertainty
Our broker panel wasn’t united on all fronts; there were a few splits or topics that saw no strong commitment in either direction.
Brokers’ growth projections are mostly steady or moderate, but some think the market will stay flat or even decline. Growth is never a given and that’s certainly the case in 2025.
Several brokers expect little to no major changes to year-end, while others think too much hinges on wider economic stability for them to be confident either way.
SME Lending Gap
Research we conducted at the start of the year revealed a striking trend over the past 20 years that has brought established businesses and their brokers to a difficult place today. What we’re calling The SME Lending Gap has become a major inhibitor of growth.
Compared to historic trends, bank lending to SMEs is roughly £90bn below trends suggest it should be. For large businesses, private credit has made up for more than double the shortfall in bank lending. For smaller businesses, private credit has only made up £25bn of the difference. What we’re left with - The SME Lending Gap - is £65bn of missing investment, growth and employment opportunities.
The Lending Gap is multifaceted but rests on two key factors: banks have steadily shifted their lending appetite towards collateral-backed deals, while at the same time slashing access to business overdrafts. Available business overdrafts in 2023 are just 10% of their 1990 total.
Financing investments and expansions has become increasingly difficult, to the point that UK SMEs have the lowest loan application rates in the G7 and rejection rates have gone from just over 10% to around 40%.
What The SME Lending Gap is doing to Britain’s businesses
A lack of access to finance isn’t just a frustration for small business owners, it’s a barrier to the country’s ambitions.
Established businesses are forced to either play it safe and stick with their lot, or self-fund their growth at a far slower pace. Opportunities go unmet and growth goes undelivered.
Much has been made of the UK’s productivity problems, but these don’t occur by chance. Credit fuels growth and allows businesses to reach new heights in a sustainable way. Without access to
finance, only a sliver of businesses have the capital position to comfortably make big investments.
When SMEs are able to secure finance from banks, the majority of lending is going towards property investment. Collateral-backed assets in a well-established market – a safe bet for steady returns, but very little in the way of commercial growth, R&D or innovation. The lending supply is being starved and what does get through to established businesses isn’t funding growth projects.
Richard Davies, CEO at Allica, has gone on the record saying that: “SME finance is not a narrow market issue, but a key enabler of reinvigorated UK economic growth and productivity.”
How brokers can bridge The SME Lending Gap
At a time when the supply of finance is far below where it should be, brokers will play a vital role in rebooting the UK economy.
Whether its connecting a business owner with a lender, helping them make a killer application, or even pointing them in the
direction of the right kind of funding, the support of a broker will be critical for plugging that lending gap and unlocking growth.
Here at Allica, we know how important the role of lenders is going to be. And we’ll continue to develop our products to meet the needs of your clients, enhance our broker offering to make working with us easy and efficient, and help our broker community to support their clients in every way we can.
Final thoughts
Steve Palfreeman Head of Sales - Bridging Finance at Allica Bank
You might be tired of hearing this, but it’s been a challenging time to run or work with established SMEs of late.
That’s been the refrain of the last five years, but an uncomfortable truth is still the truth.
Rising costs, interest rates, access to finance, and the broader macro-economic and political climate have all put pressure on business plans.
Established businesses can’t snap their fingers to achieve growth - it requires a real effort from a network of partners. Brokers have one of the most important roles. You’re in a uniquely valuable position, as you can cut through the noise to unlock opportunities for your clients. From the lending side, we can only promise that Allica will continue to deliver the service and finance you and your clients deserve.
Despite these challenges though, our survey results show that brokers are feeling optimistic and they’re seeing positive signs from their clients and lenders. I’m feeling really encouraged by that and it says a lot about the resilience and ambition found up and down the country.
About Allica
Allica is a bank built especially for established businesses with between 5 and 250 employees.
These businesses make up a third of UK employment and turnover, yet the service they get from the big banks is increasingly impersonal, inconvenient, and poor value. We don’t think that’s right.
Allica Bank is on a mission to give established businesses, and the brokers who support them, the banking they deserve. That means fast decisions, and a dedicated business development manager you can actually get hold of. We combine powerful technology with real human expertise to make your job easier and your clients’ experience better. It’s how business banking used to be – just better.
Allica Bank has been recognised with a number of industry awards. We won four NACFB Awards in 2024, including ‘Business Bank’ and ‘Commercial Finance Lender’ of the year. We were also awarded ‘Commercial Mortgage Lender’ by Bridging & Commercial for five years in a row
Allica
Bank is
on a mission to give established businesses the banking they deserve.
