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How SMEs can manage rising cost of materials

Rising materials costs are stretching SMEs to breaking point and the cutting of economic growth forecasts suggests little respite for owners. How can they manage cashflow? Alternative finance is part of the answer.

New data from the Federation of Master Builders shows that over a third of small building firms are feeling the pinch as a result of the rising cost of materials including timber, bricks and windows. The pressure on already thin margins is blamed largely on falling exchange rates, caused in part by the ongoing and deepening uncertainty concerning the UK’s departure from the EU.

Small building firms are not the only SMEs being affected by a weak Pound and limp market conditions, and the decision by the Bank of England to hold interest rates and cut growth forecasts (which has seen the Pound drop further) suggests that business owners should expect the challenges to continue. Alongside a rise in the price of materials, they are having to foot the bill for pension auto-enrolment, enhanced cyber-security, and new living wage and apprenticeship legislation. The ongoing struggle to effectively combat late payment is yet another burden.

So, how can SMEs manage these costs and safeguard cashflow at the same time? Alternative finance services have a role to play. While many small businesses remain welded to traditional lenders, there is a growing trend towards alternative sources of SME lending. As a result, in recent years, the popularity of the likes of invoice finance, asset finance, peer-to-peer lending and crowdfunding has grown dramatically.

Why? Because their affordability, accessibility and flexibility have proved a lifeline for small business owners at a time when traditional means of small business funding have become increasingly difficult to secure.

Looking ahead, while awareness of all the available funding options is still an issue, if SMEs are going to be able to cope with rising material prices and other financial burdens, it is clear that financial planning has to include alternative finance.

To find out more about A&T Business Associates services, contact us on 01903 602211 or info@atbusinessassociates.co.uk.

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