It may be a few months since the reorganisation of energy bills support made the news but these costs are still biting hard into small firm budgets and threatening their very existence. In the face of severe headwinds, how can businesses manage their cashflow?

High energy costs still hitting businesses hard

The stratospheric rise in energy costs has been brutal for small businesses. While the government has offered some assistance, the restructuring of the energy bills support scheme has ratcheted up the pressure on firms.

Notably, a significant number of businesses have found themselves locked into high-cost energy tariffs, which has left them paying above-market rates. According to surveys from the British Chambers of Commerce and the Federation of Small Businesses, as many as one million small firms are in this position.

Criticism of energy suppliers as small firms search for solutions

Unsurprisingly, criticism of energy firms has been as sharp as it has been increasingly vocal. Recently, a number of larger firms, including Iceland and Burger King, have openly accused gas and electricity companies of profiteering and discrimination. Crucially, while these businesses are better equipped to deal with the increase in costs, small firms are much more vulnerable.

The situation is highly challenging and businesses are finding hard to cope. Passing costs on to customers is one solution, but this comes with the risk of losing sales. According to research from Paragon Bank, over half of SMEs are having to raise their prices in face of soaring energy bills.

Another option if price rises aren’t enough or aren’t feasible is investing in greener systems and equipment and improving energy efficiency. However, such a step comes with its own price tag. For the most vulnerable, the outlook is increasingly desperate. According to a study by Local Data Company, nearly 2,000 independent local stores were left vacant in the first half of the year as the cost of living crisis hit the small business sector.

Big energy bills and how alternative finance can help

As the economic slump continues and energy bills remain high, what can small business do to manage their cashflow and safeguard their capital?

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 the current funding climate (with 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.

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.

SME finance options for energy costs

With the cold season swiftly approaching, concerns over energy costs are set to become as acute as ever for small businesses. What the government does to help the sector, if anything, remains to be seen. Access to finance will be critical to managing cashflow. This is why it is vital that firms 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 Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.