Challenges range from lender appetite to inadequate loan values
A third of commercial finance brokers are struggling to find lenders willing to fund business acquisition deals, findings of a survey by Asset Advantage has revealed.
In addition to difficulties with lender interest, 20% of brokers reported trouble obtaining the right loan amounts for acquisition deals. Respondents also pointed to challenges in gathering necessary information and understanding both the mechanics of acquisitions and the preferences of funders.
Given these hurdles, it is not surprising that only 57% of brokers surveyed had successfully secured funding for business acquisitions, with one broker stating that acquisition finance lenders tend to be split into the sub-£250,000 and over £1 million categories.
“Those funding less than £250,000 often get bogged down with the volume of required information, which can kill the deal,” the broker explained. “Those over £1 million can be difficult to build relationships with, and their loan amounts can be restrictive.”
Another survey respondent commented, “Following the Liz Truss premiership, it made the market even tougher with rates bouncing all over and lenders anticipating recession and difficult trading. Hardening of appetite was frequent and deals that had previously been done by a lender were now getting declined and this was acknowledged by different lenders. On top of this, clients’ expectations lagged behind where the market was in terms of rate, deal structure and security.”
The Asset Advantage survey gathers input from commercial brokers on a variety of topics to determine the current state and evolving demands of the commercial finance market. It aims to identify the key challenges facing brokers, along with their views on lender appetite and the overall lending landscape.
“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,” said Philip Knight (pictured), credit and risk director at Asset Advantage.
“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.”
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