If managing the impact of the pandemic and the prospect of higher national insurance rates wasn’t enough, small business owners now have to deal with a marked rise in energy bills as the gas crisis looks set to bite. How can they find the cash and safeguard cashflow?

A perfect storm of factors, ranging from a post-lockdown surge in demand for gas, the onset of winter in Europe, supply shortages from Russia, to high gas demand in Asia, maintenance to North Sea gas platforms and a lack of wind to power turbines, have combined to create an energy crisis in the UK, and another cashflow-related headache for small businesses.

Wholesale energy prices have risen an astonishing 250% since the beginning of the year, pushing smaller suppliers out of the market and forcing the big six that remain to warn customers, including small businesses, of impending price hikes. For firms already getting by on fine margins as they target regrowth and recovery, the news that they will have to deal with a marked rise in energy bills presents a significant challenge.

Rising gas prices, NI rates and other bills: how SMEs can cope

Notably, the news of plans to increase energy prices, with higher payments likely to be introduced both in October and in April next year, comes on heels of another scheduled hike in business tax, with national insurance contributions due to go up in 2022 as the government looks to fund major investment in the health and social care infrastructure.

While small business optimism has been at record levels, fuelled by the move out of lockdown and the dropping of restrictions, it is difficult to see such confidence continuing in the face of a jump in energy prices and higher national insurance payments. Nevertheless, small businesses have little choice but to face down these headwinds and plot a course forwards.

So, the question is, how can these firms manage the impact of the extra energy costs and protect cashflow so that they can continue on the road to recovery? Awareness of small business finance options, including the services of alternative lenders, will be key.

Affording higher gas bills and how alternative lenders can help

With regard to alternative finance, in the wake of prolonged caution from traditional lenders, which is an issue that has returned during the pandemic, services such as invoice finance, asset finance and peer-to-peer lending, are proving a vital source of capital for small businesses, both for maintaining cashflow and for essential investment.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping small businesses survive and target recovery and regrowth.

Furthermore, alternative lending is playing a prominent role in the government’s headline emergency support scheme, the Recovery Loan Scheme (open until the end of 2021). Invoice finance and asset finance between £1,000 and £10 million per business are available under the initiative. This profile is helping cement the reputation of alternative finance in the business sector.

Rising energy costs and SME finance options

The announcement that energy prices are set to rise steeply is the last news that small businesses wanted, but it is critical that they plan for the increase and its impact on cashflow. To manage the extra burden on capital resources, it is vital that business owners are aware of all the finance services available to them, including alternative finance facilities.

To find out more about A&T Business Associates services for commercial property investors, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.