"There will be an increased use of online platforms to make it easier for clients to access finance."
We’ve already seen some positive signs from Shawbrook Bank, who recently suggested that its commercial mortgage enquiries were nearly three times greater in January 2020 when compared with the same month last year. In a similar vein to the rise in enquires seen across the residential property market, it’s not too far of a stretch to realise that much of this could be explained by the decisive election result back in December. After all, no property market likes uncertainty, and the degree of political certainty emerging from this vote has certainly helped provide a lift for all property-related activity. And this level of stability appears to be enticing house buyers and investors back into the market and to even broaden risk profiles across their portfolios.
So, what else can we expect from the commercial mortgage market?
First, and foremost, there will be an increased use of online platforms to make it easier for clients to access finance. These will help match investors - who are looking for a higher return on their money - with clients needing to borrow, for example, deposits through property funds. Retailers themselves are utilising innovative technology to grow their client base through logic capabilities algorithms which can provide predictive insights into customer behaviour, which in turn can transform their property location strategy.
However, obstacles surrounding access to finance for SMEs remain. A recent study from specialist lender Together has indicated that hundreds of thousands of UK SMEs have been turned down for property finance over the past five years.
It reported that nearly a quarter of SMEs said they had struggled to find the funds to move or expand – with inflexible lenders and a shortage of suitable property proving the biggest problems. The research showed that even the 24% which have successfully completed property moves or upgrades still struggled to navigate challenging funding processes. Finding a suitable property was ranked as the biggest problem by SMEs – 30% said it was an issue – but the next four biggest challenges were all driven by issues with lenders and raising finance. Around 28% of firms said lenders were inflexible, while the same number – the equivalent of nearly 840,000 firms – had applications rejected during the process. 27% said they had to resubmit applications and nearly one in five (19%) said lenders did not understand their businesses.
SMEs remain the lifeblood of the UK economy, and these figures highlight just how difficult it can be for some firms to access the type of finance which could support their business and help with expansion plans. In fairness, commercial lenders are being asked tough questions when it comes to funding lines and risk appetites in what remains some uncertain times for the UK high street and general economic conditions. Having said this, SMEs are evolving within this shifting climate and lenders have to be more flexible in both their criteria and product ranges in order to meet these needs. The Bank of England is also doing its bit after loosening some of the restrictions on banks to allow them to lend more to businesses, which is estimated to free up an extra £190bn of credit to the economy.
Thankfully, there are enough positive indicators to suggest that the market is moving in the right direction, and much of this is being generated through specialist lending and distribution channels, a factor which really highlights the importance of the advice process. Which means that intermediaries should be tapping into the increased demand for alternative finance as many of their existing clients, and potential new ones, will be part of this growing SME army. And now is the time to engage with them for their business as well as personal borrowing requirements.