According to a survey from Asset Advantage, a third of commercial finance brokers said they have found it challenging to gain appetite from lenders for business acquisitions. This is in line with figures from last year.
The survey this year added that the number of brokers finding it challenging to secure 100% funding has gone from two in 10 last year to four in 10 this year.
Around 42% of brokers said lenders were not equipped to back smaller acquisitions and that there were limited funding options.
Commercial finance brokers added that for lenders who do offer business acquisition funding, security and credit requirements were still a hurdle.
Brokers interviewed for the survey said it was a “very small lending market”, and another said it was “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”.
The changing role of the Bank of Mum and Dad
Sponsored by Aldermore
One broker added: “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.”
Gary Thompson, sales director at Asset Advantage, said: “Despite sizeable demand in the market for acquisitions, management buy-outs (MBOs) 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.”
He continued: “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.”
