The expected interest rate rise didn’t happen, but small business remain on high alert – over business rates. Already a burden, the cost of this tax could rise next year. How can firms manage the impact on cashflow?

Business rates have long been a source of great tension for small businesses, with criticism of the tax system growing louder and more persistent. And with the Bank of England deciding against raising interest rates, the topic has been thrust again into the spotlight, with many firms seeing the tax as a potential threat to their survival.

Why business rates are causing so much stress

At present, a significant number of small businesses benefit from business rate relief – retail, hospitality and leisure receive a whopping 75% discount – and this is an absolute lifeline. Without it, the future of many firms would be called in to question. However, this rate relief is due to come to an end in April.

While the government is widely expected to extend the policy again (it did so in the spring Budget), there is no guarantee that it will. The fact that this represents a knife-edge moment for many smaller firms is why the momentum behind business rate reform is increasing.

Notably, the Federation of Small Businesses has called on the government to extend the small business rate relief scheme and revamp the current tax in a way that would remove 250,000 small firms from rates system. The sector is also keeping a close eye on the progress of the Non-Domestic Rating Bill, which could cap business rate bills for firms in England that invest in their operations by making qualifying building improvements.

Paying business rates bills and how alternative finance help

The heightened tension around the future of business rates comes as little surprise given the pressure that small businesses continue to face. While interest rates having stopped rising for now, they remain at a high level and the state of energy, materials and labour costs remains a major barrier to investment and development.

Regardless of the government’s decision on business rates, small firms need to ensure access to finance if they are going to pay the bills and get themselves into a position where sustained growth is possible. This is where 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 and 65% more SMEs experiencing difficulty in accessing finance from high-street banks as of August 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.

Business rates and small firm finance options

The focus on business rates is timely with the Autumn Statement just round the corner and it will interesting to see if the government provides any indication of whether it will extend the relief scheme again. The fact that a general election is due in 2024 may steer decision-making.

Nevertheless, business rates remain one of many balls that small firms must juggle and to manage this juggling act, access to finance is critical. Given the current climate, it is vital that firms are aware of all the available options, 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.