Lack of appetite from lenders for business acquisitions still holding back commercial brokers
Commercial finance brokers continue to report a lack of appetite or options from lenders for business acquisition deals, new research from SME funding provider Asset Advantage has revealed.
A third of brokers have expressed difficulty in gaining appetite from lenders for business acquisitions – the same as in Asset Advantage’s 2024 broker survey. The number of brokers finding it challenging to secure 100% funding has more than doubled compared to last year – jumping from two-in-ten, to over four-in-ten commercial brokers.
Meanwhile, just over two-in-five brokers (42%) say that lenders are not equipped to support smaller acquisitions, with limited funding options. Commercial brokers also said that for lenders who do offer business acquisition funding, security and credit requirements can be a real barrier.
Speaking to Asset Advantage, one broker called it a “very small lending market”, while another said: “It’s often difficult to find a funder that can offer the full amount, or not enough security within the acquisition for most funders to consider the deal.”
One broker said: “Even with security available, there are very few funders willing to look at the ‘bigger picture’ and properly take into account the proposed business case. Many rely solely on credit scores and financial formulas which many good businesses may not qualify through for a number of reasons.”
The findings form part of a new survey conducted by Asset Advantage, a leading independent funder of business finance for UK SMEs. It questions commercial finance brokers on a range of topics to determine the key drivers behind lender appetite, activity and demand. The survey uncovers challenges facing both commercial brokers and SMEs when securing business funding, as well the views of brokers on the future of economy and the wider market.
Asset Advantage has been providing business finance for nearly two decades, offering both asset finance and business loans of up to £1m to support equipment purchases, business acquisitions, growth and expansion-based lending. Its business loan proposition is often used to support business acquisitions and both management buy-outs (MBOs) and buy-ins (MBIs). Unlike other funders, Asset Advantage always looks to loan the full amount and has funded many smaller acquisitions and MBOs, with minimum loans of £75,000 available.
Gary Thompson, sales director at Asset Advantage, said: “Despite sizeable demand in the market for acquisitions, management buy-outs and buy-ins, our research shows that for a second year running, commercial brokers remain held back by funder appetite, options and loan values. Beyond finding a suitable funder, we are seeing real challenges, particularly around smaller acquisitions and tighter requirements of some lenders that prevent them from coming to the table.
“In today’s challenging business landscape, acquisitions and MBOs offer SMEs a valuable way to ensure quick scalable growth and continuity as business owners weigh up their options and management teams plan for the future. For the ongoing health and prosperity of our SME businesses, it’s absolutely critical that these funding lines are available and most of all, accessible. From our perspective, business acquisitions remain a real growth area, working with brokers to really understand deals both large and small, the bigger picture around them and provide the necessary funding to cover the entire purchase. Rather than rigid processes, it takes a flexible, pragmatic approach which not all lenders are able to offer.”