This year has already proved a tough one for smaller firms and the dark clouds continue to gather, with news of falling confidence and a rising number of insolvencies. So against this backdrop, how can businesses fund survival in Q3 and beyond?

Unsurprisingly, despite the resilience on show, firms are finding it hard going in 2023. According to new research from American Express and Small Business Saturday, one third of SMEs believe that running a business has got more difficult this year.

The study reveals that rising inflation is the principal reason cited by firms for the challenging conditions and their concerns for the next six months, followed by the rising costs of good, services and energy, as well as fixed costs, such as business rates, tax and labour. Notably, cashflow issues are stalling growth plans.

Insolvency and confidence data underlines challenges for SMEs

The impact of a weak economy and downbeat market conditions on the small business sector is clear to see. According to new data from the Insolvency Service, 6,342 companies in England and Wales were registered as insolvent in the three months to June, the highest level since Q2 2009 and an increase of 13% of the figure for the same period in 2022.

A study from CyberSmart paints a similarly bleak picture for the months ahead. The survey revealed that over 20% of senior leaders and decision-makers are concerned that their businesses will not survive the current economic troubles or that they will have to make a notable pivot with their businesses in order to stop them failing.

Given this data on operating conditions and insolvencies, it’s hardly surprising to see that business confidence plummeted in Q2, down to -14.2 points (from -2.8 points) according to the Small Business Index from the Federation of Small Businesses.

Making it through 2023 and how alternative finance help

These are extremely tough times for small businesses, but it’s not all bad news. Over three quarters of SME owners are ready to develop their companies over the next year, with almost two thirds expecting conditions to improve in Q4.

This positivity is encouraging but, at the same time, the reality of the last seven months can’t be ignored. However the coming months pan out, access to finance will be critical. This is where the services of alternative lenders 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 a funding climate characterised by prolonged caution from traditional lenders. Indeed, the issue has returned amid highly challenging post-Covid-19 market conditions, with bank loans to SMEs falling by £14 billion in the year to March 2023.

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. Notably, alternative lending played a prominent role in the government’s headline emergency support schemes.

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.

Realising growth ambitions and SME finance options

Small businesses are undeniably in a tough spot, and data on insolvencies and confidence is a reminder of just how challenging conditions are. But the sector is proving resilient and there is a clear appetite for growth. Safeguarding cashflow and investing in development is integral to survival and realising growth, and this is why it is critical that businesses are aware of all the finance options available to them, including alternative finance facilities.

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.