The energy price cap may have been reduced, but energy bills remain a primary driver of rising business costs for small businesses. And as winter approaches, so does the prospect of yet more pressure on cash flow. How can firms manage the burden?

While rising energy prices are no longer headline news, or at least attracting the same level of attention, the issue continues to be a source of deep concern for smaller businesses, not least with a period of intensive energy use starting now.

Are energy bills still affecting small firms?

According to the latest Small Business Index from the Federation of Small Businesses, almost 60% of the firms that took part in the survey said that utilities were the main cause for rising costs in Q3. Clearly, higher bills are still a problem for many businesses, in particular for those that continue to be hamstrung by high fixed tariffs.

This has led the Federation to renew calls for Ofgem to take steps to ease the pressure on small firms, including by giving them the flexibility to cancel contracts through the use of a 14-day cooling off period and by freezing standing charges.

Such relief would be warmly welcomed by the small business sector after another highly challenging year and as many get ready to enter what is always a higher-energy-cost quarter. There is also the prospect that the cost of upgrading the energy grid may contribute to keeping prices high in 2024 and beyond.

Q1 2024 energy costs and how alternative finance can help

What small businesses can expect from Ofgem and the energy sector remains to be seen. Based on developments in recent years, firms can be forgiven for being pessimistic and presuming the onus will again rest largely, if not entirely, on them to find a solution to higher bills. And 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 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.

Winter energy bills and SME finance options

Energy costs may not be making the headlines any more, but for smaller firms managing their impact on cash flow remains a priority, and a struggle. With an energy-intensive few months ahead, many firms will have to dig deeper than ever. This is why it is vital that businesses 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.