Are SMEs at breaking point? Recent surveys suggest that the business confidence talked up at the beginning of the year has all but evaporated. In the face of unrelenting market headwinds, how can small firms protect cash flow and fund survival and growth?

Recent studies have produced some sobering results. According to the Federation of Small Businesses, over a quarter of small business leaders believe that their companies will downsize, close or be bought in the next year. Such sentiment, with business confidence at record low levels, offers a bleak prognosis for the small business sector and the wider economy.

The findings of a survey from Dext paint a similar picture. According to the data, over half of SMEs says that they are one more major cost increase away from having to shut down, with the same amount for firms believing that the economic climate is more volatile now than it was during the pandemic. Notably, almost half of businesses have faced cash flow problems or have used emergency funding, while over a quarter have reduced their workforce or stopped recruiting.

Research from Intuit QuickBooks offers more evidence of these concerns and the exhaustion of the sector. According to the study, over 55% of businesses are predicting rising costs in the second half of the year, with almost two thirds of owners worried about the future of their businesses. Nearly half of firms revealed challenges relating to cash flow.

Accessing SME finance and how alternative lenders can help

The recent studies suggest that the SME sector is very much in survival mode. The question being increasingly asked is, in face of prolonged volatility, how can firms continue the balancing act of safeguarding cash flow while managing rising costs and investing in essential systems and services?

Remarkably, despite the gathering gloom, there is still optimism and appetite for growth, but access to funding is critical. However, continued caution from high-street banks is only making conditions tougher. This is where alternative finance can help.

Small business lending from traditional sources remains subdued as Q3 gets under way, with a third of small businesses struggling to access the finance they need in 2025. As a result, alternative lenders are becoming 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.

SME finance options for funding survival in H2 2025 and beyond

The evidence is growing that the small business sector is fast approaching a tipping point. However, despite the collapsing confidence levels, there is still optimism and desire to grow. Nevertheless, firms can only be resilient for slow long in the face of relentless pressure on margins and cash flow.

If small businesses are going to ride out the seemingly never-ending storm, access to finance is critical. This is why it is essential 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.