There has been no respite for small firms in 2023 – it’s proving another highly challenging year. To survive and grow, businesses need access to finance, but this is becoming increasingly difficult. What’s the answer for these companies?

A new survey has underlined the degree to which small firms are struggling to access funding and the impact that this is having on their ability to invest in their businesses. According to the research from the Manx Financial Group, 40 per cent of SMEs have stopped or paused an area of their business as a result of a lack of funding, up from 27 per cent last year.

The increased cost of borrowing is cited as a main reason for the trend, with rising interest rates a key factor, with the length of the borrowing process and a lack of flexibility other prominent barriers. The areas in which a lack of financing is having the most impact is staff recruitment and new market expansion.

The costs of borrowing from big banks was also highlighted in a recent study from HedgeFlows. According to the survey of 500 SME owners, almost three quarters felt that their banks could provide more support, while a similar amount said that bank transfer fees abroad were too high, which was disrupting international growth plans.

Funding growth and how alternative finance help

The growing pressure on small firms in terms of accessing finance is clear. While some have longer-term structures in place that are allowing them the funding they need, many do not and they are sacrificing development plans as a result. And this is a real threat to the sector, with the number of small business insolvencies rising notably.

So, how can small businesses meet this challenge? Alternative finance can help.

Services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses in a funding climate characterised by prolonged caution from traditional lenders. Indeed, the issue has returned amid highly challenging post-Covid-19 market conditions, with bank loans to SMEs falling by £14 billion in the year to March 2023.

These alternative finance facilities, which offer a more easily accessible, affordable and personalised approach to lending, are helping small businesses survive and target recovery, stability and growth. Notably, alternative lending played a prominent role in the government’s headline emergency support schemes.

This profile has helped cement the reputation of alternative finance in the business sector, with a recent study showing that more than 50% of small businesses are looking to use finance to achieve growth in 2023.

Accessing funding and small firm finance options

With little prospect of a meaningful improvement in market conditions, it is imperative that small firms can access the finance they need to maintain operations and afford the development critical to survival and growth. With bank borrowing becoming increasingly challenging again, it is vital that small business owners are aware 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 Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.