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How small firms can afford to turn optimism into growth

Is the country recovering from recession? Is consistent economic growth on the horizon? New data on small firm confidence has added fuel to this fire. But if it’s true, how can these businesses afford to invest in new growth?

What does leap in small business optimism mean?

The latest edition of the FSB business index on small business confidence has produced some interesting results. Whether or not the sentiments expressed are another sign of impending economic upturn remain to be seen, but combined with a growth in GDP, there is clearly enough there for the connection to be made.

According to the new FSB report, business confidence jumped 20 points in the first quarter of the year, giving the index a positive score for the first time in two years. Most sectors recorded an increase in confidence, with manufacturing the most bullish of the lot.

However, context is everything. Notably, despite the lift in optimism, small business sector revenue for the three-month period still fell, reflecting the impact of a prolonged market malaise and the pressure on the firms that make up a large part of the economy.

Similarly, if GDP growth for March is announced as expected, it will be widely welcomed and keenly interpreted as another sign of better times ahead. However, this growth, if it happens, will be only around 0.1%, putting quarterly growth at around 0.4%. Positive, sure, but nothing to get carried away about.

Funding investment and how alternative lenders can help

Any news of growth will be eagerly met by small firms and they will want to position themselves to benefit from it as and when the market improves. However, given the length of time that they’ve been under the economic cosh, finding the capital to invest is far from easy. 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 investing in growth

Are the green shoots getting bigger? Is there light at the end of the tunnel for small firms?

The upturn in small business confidence and GDP growth are encouraging, but there is clearly a long way to go. Nevertheless, it is important that firms can maximise any upturn in spending power and for most, this means investment. With traditional lenders shying away from small business lending, it is vital that 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 Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.

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