The recent spike in the price of diesel has put vehicle fuel costs back in the headlines. Small businesses, already existing on thin margins, are highly vulnerable to this increase. How can firms protect their working capital and safeguard their operations?

What is driving up small business commercial fleet costs?

The impact of the US war against Iran on fuel prices, and the consequences for small businesses, is becoming increasingly acute. The latest surge in the cost of fuel, in particular red diesel, on which farmers rely, comes at a particularly bad time. Firms across the board that operate commercial fleets of all shapes and sizes are looking at yet more pressure on margins and yet more difficult decisions about cashflow.

While surging fuel prices are affecting all businesses, smaller firms are more susceptible to these fluctuations, not least as they don’t have the same depth of resources to absorb such jumps in costs – after years of battling economic uncertainty and significant market headwinds, they have little wiggle room when it comes to managing such volatility.

However, that is not to say that small businesses with commercial or other types of fleets aren’t showing considerable resilience. Purchasing habits are shifting, with a move away from new vehicles to second-hand ones and an increase in the uptake of electric vehicles, which are viewed as cheaper in the longer-term.

That said, there is a limit to which these smaller firms can keep pulling rabbits out of their hats. Aside from rising fuel costs, parking costs are increasing and the number of free parking spaces continues to shrink as local authorities struggle with budgets. Furthermore, the temporary reduction in fuel duty is set to be withdrawn at the end of the year.

How alternative lenders can help with managing commercial fleet costs

The jump in fuel prices is a huge test for small businesses, and while there are steps firms can take to manage the impact, in many cases this involves investment – for example, in new vehicles, specialist staff or tailored tools – and for a significant number of businesses, such expenditure presents a significant challenge.

Access to finance is critical to coping with fluctuating fuel prices, in terms of safeguarding working capital and maintaining operations, but with traditional banks continuing to be cautious in their approach to small business lending, this is far from straightforward.

This is where alternative lenders can help.

Alternative lending solutions, such as invoice finance, asset finance and peer-to-peer lending, have become funding lifelines. For example, asset finance is being commonly used means for buying vehicles, machinery or equipment, while invoice finance is being employed to manage staff costs and, more broadly, to cover costs while income catches up.

Overall, by offering a more accessible, cost-effective and personalised approach to lending, these alternative finance facilities are helping small businesses navigate the current climate and target greater stability and growth.

Small business options for commercial fleet finance

The latest leap in fuel prices heaps yet more pressure on already stretched small businesses finances, and there is little indication that the uncertainty will come to an end any time soon. Yet firms have to find a way to pay the bills, safeguard cashflow and keep their fleets rolling.

Accessing finance is critical, and this is why, with traditional lenders remaining cautious when it comes to small firms, it is important that key decision-makers are aware of all the 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.