The winding down of energy bill support for small businesses has been long trailed by the government, but nevertheless, the arrival of the new, less generous scheme has served as something of a jolt for many firms. How can they survive this latest hit?

The last thing small businesses need right now is more pressure on capital and cashflow, but this is exactly what many are facing with the introduction of the Energy Bill Relief Scheme in April. The Federation of Small Businesses has made plain its fear for the sector.

According to the organisation, around 370,000 businesses could be forced to reduce services, restructure or close their doors when energy bills go back to their higher prices under the new scheme.

The most vulnerable firms are those locked into energy contracts that were agreed in 2022 when prices were sky high. While the old reduction-based support scheme took the sting out of bills, leaving manageable costs for firms, the new initiative provides a vastly smaller amount of relief, which will mean much higher bills for businesses.

The contention of the Federation is that this hike in costs will prove too much for a significant number of firms, which are already facing extraordinary pressure on their finances. Although there has been talk of getting inflation under control, it continues to rise, as do interest rates, with rising prices and costs weighing heavy on small businesses.

Energy costs hike and how alternative finance can help

The government is seemingly welded to its new energy bill relief scheme and the level of support it provides, so it will be interesting to see how it reacts if the fears of the Federation come to fruition. Whether it would rethink its strategy remains to be seen.

In the meantime, many small business have to face up to an even greater burden on resources, while finding the capital to fund essential development and target growth. For many, this path just got a whole lot trickier. This is where alternative finance can help.

In the wake of prolonged caution from traditional lenders, which is an issue that has returned during the pandemic and amid challenging post-COVID-19 market conditions, services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses.

These facilities, which offer a more easily accessible, affordable and personalised approach to lending, are helping small businesses survive and target recovery, stability and growth. Notably, alternative lending played a prominent role in the government’s headline emergency support schemes in 2022.

This profile has helped cement the reputation of alternative finance in the business sector, with a recent study showing that more than 50% of small businesses are looking to use finance to achieve growth in 2023.

Colossal energy bills and small firm finance options

Surviving 2023 will be a feat worth celebrating for many small firms, in particular those that are most vulnerable to the structure of the new Energy Bill Relief Scheme. For these businesses, and others, access to finance will be crucial as they plan ahead. This is why it is critical that they are aware of all the funding 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.