There is no guarantee that 2024 will bring long-awaited economic recovery but optimism is growing. If the upturn does materialise, small firms will be keen to take advantage. But this will require investment – given the current climate, how can they do it?

Optimism vs pessimism: what’s the SME outlook?

First things first, while talk about an improvement in market conditions is growing louder, it is far from certain that it will happen. Indeed, the Federation of Small Businesses’ Small Business Index revealed a dip in small business sentiment in Q4 2023, signalling that anxiety around economic pressures remains high.

However, at the same time, there is evidence that optimism among small businesses is growing again against the backdrop of a more positive economic outlook. According to the latest iwoca SME Expert Index, concern among SMEs regarding a potential recession has eased notably, with the number of firms having such fears falling from almost 75% of those surveyed to under half.

Findings from the Skills Horizon 2024 Barometer paint a similar picture. According to the research, a large majority of SMEs plan to grow revenue for the year, a level up from the previous year. On average, firms are expecting to grow by over 25% in 2024, while the number fearing a recession has fallen from over a quarter to 16%.

Furthermore, according to the latest Natwest SME PMI Business Activity Index, business activity for SMEs has reached its highest level since May 2023. It points to this as a positive sign for this business sector.

Planning for growth and how alternative lenders can help

It is too early to be definitive about what lies in store for the economy and the small business sector, but a recovery in market conditions is an opportunity that firms won’t want to miss out on. However, with investment a key component of growth, businesses will need to spend and there is a major barrier to such development: costs.

A recent NatWest report points to rising businesses costs as the primary obstacle to increasing activity and to benefitting from potential economic growth. So, how can firms find a way to plan for growth while safeguarding cash flow in a still lacklustre market?

One solution is alternative finance.

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). 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 2024 study showing that more and more SMEs are turning to alternative lenders to access larger-scale finance packages.

Small firm finance options for investing in expansion

Benefitting for an upturn in economic conditions could involve all sorts of investment for small businesses, from expanding workforces and buying new equipment to targeting new markets and doing more to achieve sustainability goals.

If firms are going to take these steps, with traditional banks retreating from the SME lending sector, it is vital that they 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.