It may have been overshadowed, but the introduction of new flexible working legislation was a significant moment for the country’s workforce and businesses. There are plenty of benefits, but for small firms, there are also costs. How can they manage them?

What does new the flexible working law mean for small firms?

Post-Covid-19, flexible working has seemed like the norm, with two or three days per week spent working at home a common practice. Introduced in April, the Employment Relations (Flexible Working) Act 2023 has gone a long way to formalising this state of affairs, with employees given the right to ask for flexible working from day one. Employers have a shorter time to reply to a request and must consider all options should they want reject it.

While employers can still decline requests, the arrival of the new law feels like a notable shift in power, with employees in a stronger position. And the new measures bring plenty of advantages, in particular those that have to balance working with conditions or responsibilities. The change in obligation can help retain talent and widen the recruitment pool.

However, for all the positives, the legislation does bring some pressure for small firms, in particular those that don’t have the same level of resources or flexibility as larger businesses. Notably, a recent study from Slack revealed that over half of managers are concerned about receiving new and more requests for flexible working. Tellingly, the same research showed that almost three quarters of businesses have yet to share the new rules with staff.

New flexible working costs and how alternative lenders can help

The financial implications of having to offer greater flexibility is surely a key reason behind the reticence of some firms over the new legislation. These concerns may prove to be unfounded, but adapting to the new rules does involve some reorganisation and restructuring, and for small businesses, the bill for this isn’t insignificant.

While the talk of green shoots of recovery is increasing, economic conditions remain hugely challenging and small firms continue to bear the brunt of prolonged market headwinds that have squeezed margins to wafer thin levels. Understandably, the addition of yet more costs to the cash flow calculations is not something they’re keen on.

However, amid this pressure, the juggling act must continue. And 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 safeguarding cash flow

The greater formalisation of flexible working practices is undoubtedly a positive development that will provide long-term benefits. However, small firms are vulnerable to the immediate changes that it brings. Balancing the books and safeguarding cash flow remains a challenge for many, in particular with traditional lenders retreating from small business lending. This is why it is important that small 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.