Commercial brokers continue to face limited options from lenders when it comes to funding business acquisitions, according to new research from SME finance provider Asset Advantage.
A third of brokers said they were struggling to generate appetite among lenders for acquisition deals – the same level as reported in the firm’s 2024 survey. But the proportion finding it difficult to secure 100% funding has more than doubled year on year, rising from two in 10 to more than four in 10.
The survey also found that 42% of brokers believe lenders are ill-equipped to support smaller acquisitions, with many citing limited funding options. Even where funding is available, brokers reported that stringent security and credit requirements are often blocking deals.
One broker described the sector as a “very small lending market”, while another noted: “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.”
Another 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.”
Asset Advantage, which provides asset finance and loans of up to £1 million, said its findings underline the hurdles facing both commercial brokers and SMEs seeking to use acquisitions, management buy-outs or buy-ins as a route to growth.
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.”
He said Asset Advantage continues to offer full loan amounts for acquisitions, including smaller transactions and MBOs, by taking what he described as a more flexible and pragmatic approach than many rivals.
