To the relief of small businesses facing astronomical energy bills, a new energy costs support package has been announced. However, with questions being asked of the scheme, firms still have to get to grips with higher bills. How can they manage the costs?

Does the new energy costs support package go far enough?

As expected, and in line with her campaign manifesto, the new prime minister has quickly announced an energy costs support package for small businesses similar to that laid out for homes, with a six-month cap put on energy bills.

This will come as an enormous relief for many small firms that have already been relentlessly squeezed in 2022 by a combination of factors, including rising inflation, continued supply chain disruption, labour shortages and rising energy costs. In the run up to the announcement, terrifying stories about firms receiving quotes from energy suppliers laying out increases of up to 500% in bills had become a daily staple in the media.

However, questions are already being asked about the details of the scheme and whether it will provide the help that small businesses need. Notably, in its lobbying, the Federation of Small Businesses has called for energy grants and tax cuts, which would offer longer-term security for firms.

Much of the uncertainty stems from the short-term nature of the scheme, which is currently due to last just six months. As the end point would be only a few months into 2023, when the pressures on supply lines and suppliers are likely to still very much be in place, it is understandable that there is a growing sense of unease among small businesses.

Clear planning a must to complement external help

The new government may announce further details and even extended help in the weeks and months ahead, whether as part of an emergency budget or the Autumn Budget. Nevertheless, small firms shouldn’t rely on government actions alone – it is important that they take all the steps they can to position themselves as strong as possible for the months ahead, even in the face of the scale of the problem relating to energy bills.

Part of the planning is ensuring access to capital, which is vital to safeguarding cashflow and to investing in the kind of development that can help sustain forward momentum and create a platform for growth – and this is where alternative finance comes in.

Affording energy costs and how alternative finance can help

In the wake of prolonged caution from traditional lenders, which is an issue that has returned during the pandemic and amid challenging market conditions in 2022, services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping small businesses survive and target recovery, stability and growth. Notably, alternative lending has played a prominent role in the government’s headline emergency support schemes, including the Recovery Loan Scheme. This profile has helped cement the reputation of alternative finance in the business sector.

Paying energy bills and small firm finance options

Concerns about the prospect of skyrocketing bills may have been temporarily allayed, but there is still considerable uncertainty amount what lies ahead for small firms in terms of energy costs. While the picture may become clearer in the last quarter of the year, small firms need to have clear financial planning in place and part of this should be an awareness of all the finance options available to them, 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.