Small businesses are bracing themselves for the soon-to-be-introduced rise in employer national insurance contributions. How can firms manage the extra pressure on cash flow and still find the money to target growth?

The controversial increase in employer national insurance contributions will take effect in a few weeks and speculation about the consequences for smaller firms continues to build. The likelihood of job cuts, price rises and reduced investment looms over the sector.

According to a new survey from Iwoca, over one fifth of small businesses are planning to reduce staffing levels in order to manage the increase in costs, while over a third stated that they will reduce recruitment and almost 30% revealed they would delay promotions. In addition, almost 60% of firms said that they would have to pass on higher costs to customers.

Research from Shawbrook paints a similar picture. According to the study, over 40% of small businesses believe that the increase in employer national insurance contributions will negatively affect them, with almost 20% believing that this impact will be significant. Notably, a third of businesses said that they have increased prices, or are planning to, to deal with the change.

Managing increased NIC costs and how alternative finance can help

While there are still some doubts over the impact of the increase in employer national insurance contributions, and the reaction of small businesses, it is hard to be surprised by the pessimism that the policy is generating.

Although the picture isn’t as black and white as many are portraying – for example, small businesses will benefit from an increase in the Employment Allowance – after coping with prolonged austerity and years of severe market headwinds, of course small business leaders are on the defensive.

The increase in national insurance contributions looks like it will be yet another hit on bottom lines (and there have been many). How can firms manage this pressure, safeguard cash flow and still find the capital to invest in development?

This is where alternative finance can help.

Small business lending from traditional sources remains subdued as the clock ticks down on Q1, with 65% more SMEs experiencing difficulty in accessing finance from high-street banks. As a result, alternative lenders have become increasingly embedded in the small business finance landscape.

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. 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, the Growth Guarantee Scheme is providing a wide range of finance facilities to smaller firms, including asset finance, invoice finance and asset-based lending. This is further proof that alternative lenders are increasing filling the small business funding gap.

Small firm finance options for dealing with higher NICs

Whether the more catastrophic predictions are borne out come April remains to be seen, but, regardless, the rise in employer national insurance contributions is coming and small businesses will have to find a way to manage this increase in costs and safeguard cash flow.

This is why, against a backdrop of continued caution from traditional lenders, it is vital that key decision-makers 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.