Challenges funding business acquisition holding back brokers

A third of commercial finance brokers struggle to find lenders prepared to fund business acquisition deals, latest survey data from Asset Advantage can reveal.

Alongside difficulties with lender appetite, two-in-ten brokers said they find it hard to secure the right loan value for potential acquisitions. Respondents also shared challenges with securing all the necessary information, as well as understanding both the mechanics behind acquisitions and the appetite of funders.

Given the challenges brokers face, it’s hardly surprising to hear that just over half (57%) of brokers have been successful in obtaining funding for business acquisitions.

Speaking to Asset Advantage, one broker said: “Acquisition finance lenders tend to be split in the sub-£250k and over £1m. Those funding less than £250k struggle to get their heads around the deal and kill the deal with volume of information required. Those above £1m can be difficult to build relationships with and their debt quantum can be restrictive.”

The findings form part of the latest survey from Asset Advantage, one of the UK’s independent providers of business finance for SMEs. The survey questions commercial brokers on a range of topics to determine the state of play and changing demands of the commercial finance market. The aim is to uncover the key challenges facing commercial brokers when securing funding, as well as their thoughts on lender appetite and the lending landscape.

Philip Knight, credit and risk director at Asset Advantage, said: “Even in the challenging climate of the last couple of years, the strategic need for acquisitions and MBOs continues – as does the need for help funding these deals.

“Our latest research highlights a real issue though, with commercial brokers being held back by lender appetite, loan values and in some cases, a lack of knowledge to capitalise on these deals or find the right lenders.

“Acquisition finance requires a funder to have experience in both the underwriting and execution of transactions. The highly experienced team at Asset Advantage fulfils both elements of this requirement. The former enables us to get to proposals that are beyond some lenders, and the latter should give introducers the confidence to take on these non-vanilla deals.”