High energy prices are in the past, right? Wrong. Not for small businesses. Soaring standing charges are keeping the pressure on cash flow at the worse possible time. How can cash-strapped small firms manage the payments?

What increases in standing charges are small firms dealing with?

While the energy price cap may have been reduced, energy prices have remained a key factor behind rising business costs (in a survey earlier this year, nearly two thirds of small firms reported that utility costs were the major driver of this situation). Unfortunately, there are few signs that conditions are going to ease for firms any time soon.

Standing charges are the latest thorn in the side of small businesses, which have long suffered at the sharp end of energy policy. The rise in this fee is so great that it has driven firms to call on the Federation of Small Businesses to act on their behalf.

According to the Federation, which has publicly called on Ofgem to address the issue, it has been contacted by firms that have seen their standing charges increase 10 fold and more in just two years. One company reported its charge rising from 70.94 per day to 969.64p per day between July 2021 and September 2023.

This is a staggering increase and it is the last thing small firms need when many are still rebuilding their financial positions after a prolonged period of downturn. The sector needs little reminding of the impact of the initial energy price rises, which forced a swathe of firms to shut their doors.

Energy bill standing charges and how alternative lenders can help

While the risk posed by the increase in standing charges is not on the same level as that linked to the stratospheric rise in energy prices witnessed in 2021 and 2022, the reaction of the small business sector to yet another energy price-related crisis is perfectly understandable.

The pressure on margins and cash flow is relentless. How can firms cover these bills and still find the resources to fund growth and put themselves in a position to benefit from the much hoped for economic upturn?

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). 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. According to the British Business Bank, it is alternative lenders that are increasing filling the small business funding gap, with asset finance alone rising by 7% to £23.5 billion in 2023. At the same time, a 2024 study shows that more and more SMEs are turning to alternative lenders to access larger-scale finance packages.

Small firm finance options for paying energy bills

For small firms, it must feel like energy bills are the enemy that they can never escape. And standing charges is the latest form of attack. It remains to be seen what impact the Federation of Small Businesses can have. As such, it is important that businesses affected by the charges find a way to manage the situation. This is why 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 Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.