Brokers leapfrog lawyers, bankers for acquisition advice

The report, which surveyed 1,011 respondents, asked small businesses a range of questions about their thoughts on business conditions and financing.

According to the report, almost a third (29 per cent) used a broker when last securing finance.

The figure was markedly up from the statistics in the 2022 report when just 19 per cent of SMEs said they used a broker when securing finance.

Indeed, brokers were the second most popular source for credit assistance, only behind accountants (40 per cent).

Bankers dropped in popularity when it came to SME finance assistance, falling from 24 per cent in 2022 to 20 per cent in 2023. Similarly, finance advisers fell in popularity, falling from 22 per cent in 2022 to 19 per cent this year.

SMEs told Banjo that they believe finance brokers add value by supporting them in two key ways: sourcing interest rates that are suitable for their business (31 per cent) and simplifying the finance process (31 per cent).

Other leading factors included: 

• ‘Finding the right lender for my business’ (30 per cent)
• ‘Identifying the right product/solution for my business' (29 per cent)
• ‘Guidance over the types of finance available’ (29 per cent)
• ‘Finding the right finance term for my business’ (28 per cent)

Three in 10 also said they felt that a finance broker who could find them the right lender for their business would be a valuable resource.

Of the SMEs who chose not to use a finance broker, the main reason cited for not doing so was that they felt it was unnecessary (23 per cent); had an existing relationship with someone else/their bank (20 per cent); or have an accountant managing their finances (20 per cent).

As well as finding a growing proportion of SMEs using brokers for finance, the SME Compass Report also noted a surge in SMEs using brokers for acquisition advice.

According to the report, more than a quarter of SMEs (26 per cent) looking to acquire a business said they would seek out brokers for acquisition advice.

Indeed, finance brokers are now the third most popular professional that SMEs turn to for acquisition advice, behind only financial advisers (29 per cent) and accountants (42 per cent).

Brokers now rank higher than management consultants, bankers, lawyers, and friends/colleagues when it comes to acquisition advice.

The finding is pertinent given that more than a third of SMEs have said they are planning to merge with a competitor or acquire another business in 2023. 

Half of the SMEs intend to leverage funding this year to drive growth, especially metro-based businesses.

Noting the findings, Banjo chief executive Guy Callaghan said: “This is an encouraging sign that they’re seeing a positive future for their business on the horizon.

“While economic conditions are becoming increasingly harder to navigate, SMEs are seeking expert advice and turning more towards accountants and finance brokers to help them secure the funding they need to grow.

“Many are finding value in using finance brokers to help source affordable interest rates and make the overall borrowing process much simpler to navigate.”

However, he noted that SMEs were turning to brokers as a result of increased difficulty in accessing external funding, with half of SME respondents saying it was hard to secure finance due in part to increased interest rates. 

“Many are also finding that it takes far too long for banks to reach a decision, when small business would prefer a nimbler process,” he said.

“This inability to access funding is a barrier to growth for one-fifth of small businesses.” 

According to the Banjo report, the preferred type of external funding is a business loan, with 29 per cent of SMEs looking to use a business loan to support their business in 2023.

Business loans were found to be the preferred funding source for business owners, particularly for those in construction, real estate, and healthcare.

[Related: Banjo appoints new CRO to replace co-founder]