The need to access finance is acute for small businesses but it is becoming increasingly difficult to do so because traditional lenders are reverting to ever more cautious lending strategies. What can firms do?

The struggle faced by small businesses to get their hands on finance is not a new problem, but in a climate defined by falling spending power and rising interest rates rarely has there been a greater need for this liquidity, to protect cashflow and facilitate essential investment.

At a time of severe headwinds, not only must firms work hard to keep the wheels turning but they are also under pressure to invest in areas such as greater decarbonisation, enhanced cybersecurity and new business tech, as well as to manage increased energy and labour costs and the impact of continued late payment issues.

What research is showing about SME finance support

Notably, according to new research from Sonovate, the number of businesses experiencing problems in accessing finance from high-street banks has risen by two thirds since 2022, with these lenders pulling back from the SME market.

These findings chime with those presented earlier in the year by the HedgeFlows fintech platform – of the 500 SMEs consulted for its report, nearly three quarters said that their bank actively discriminates against them in favour of larger companies.

Tellingly, the results from a new study from the British Chambers of Commerce reveal similar concerns, with the organisation calling for better small business finance support, including in terms of increasing competition and improving awareness of finance options.

How to solve the problem of accessing SME finance

Times are tough for small businesses and traditional lender caution is not helping, but there are options for firms when it comes to accessing finance – alternative lenders 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 the current funding climate (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 new study showing that more than 50% of small businesses are looking to use finance to achieve growth in 2023.

Cashflow and investment: SME finance options

The growing number of reports on difficulties in accessing finance and the decline in SME lending paint a dispiriting picture, but there are options for businesses. This is why it is important that, as the British Chamber of Commerce mentions, owners and directors are aware of all the available finance facilities, 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.