As Q2 progresses, it is becoming clear that 2022 will be just as challenging for SMEs as previous years, with business confidence taking a hit in the wake of strengthening headwinds. How can these firms manage cashflow as pressure grows?

Recent reports from the Federation of Small Businesses and the CBI paint a sobering picture of the state of small business sector optimism. While there are pockets of increased confidence, the overriding message is that optimism is on the retreat amid worsening economic conditions and the threat of a new recession.

Business optimism under pressure as costs rise and rise

According to the Federation of Small Businesses, around 50% of small companies do not expect to grow over the coming year, with around 90% of firms having to manage an increase in operating costs. At the same time, the CBI April survey shows that optimism among UK manufacturers has decreased at a rate not seen since the first pandemic lockdown in 2020.

At the heart of the slump and the main factor behind the increase in operating costs is the war in Ukraine and its impact on fuel and energy prices. Coming into 2022, small businesses were already under severe pressure as a result of Covid-19 and Brexit failures, and Russia’s invasion of its neighbour has made conditions even more challenging.

While the news is not universally bad – small firms in the accommodation and food sector are more optimistic thanks to relaxed travel rules, as are companies in the information and communication activity space that reacted quickly to hybrid working conditions – the overriding reality is inescapable.

Managing cashflow and how alternative finance can help

How can small businesses manage cashflow as headwinds build further and find the capital to maintain forward momentum in 2022 and beyond? Alternative finance can help.

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 June 2022). 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 operating costs and small business finance options

The combination of Covid-19, a botched Brexit and the war in Ukraine is serving up a triple whammy that is pushing the small business sector to its very limits. Key to managing cashflow as these headwinds whirl is awareness of all the available SME finance options, including the services of alternative lenders.

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