Lack of lender appetite for business acquisition deals stifling brokers

Commercial finance brokers are continuing to struggle to secure funding for business acquisition deals, with new research from SME funding provider Asset Advantage revealing that a lack of appetite and limited options from lenders remain major barriers.

According to the survey, one in three brokers say they face difficulties in gaining lender support for acquisitions – the same figure reported in Asset Advantage’s 2024 broker survey. However, the challenges around securing 100% funding have worsened sharply. More than four in ten brokers now find it difficult to secure full acquisition funding, up from just two in ten last year.

The research also highlights the challenges facing smaller business acquisitions, with 42% of brokers stating that lenders are simply not equipped to support such deals, leaving SMEs with limited funding options. Even when funding is available, brokers report that strict security and credit requirements often act as a significant barrier.

One broker described the current landscape as “a very small lending market,” while another added: “It’s often difficult to find a funder that can offer the full amount, or there’s not enough security within the acquisition for most funders to consider the deal.”

Another broker criticised lenders’ rigid approach, saying: “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 Asset Advantage’s annual broker survey, which explores lender appetite, activity, and funding demand within the SME market. The research reveals mounting frustration among brokers and business owners alike as they navigate the complex acquisition funding landscape.

“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. For the ongoing health and prosperity of our SME businesses, it’s absolutely critical that these funding lines are available and, most importantly, accessible.”