With inflation soaring, both businesses and consumers are dealing with rising prices and reduced spending power. This will translate into a lack of business investment and a drop in retail spending which only serves to damage economic prospects. With the latest statistics pointing the UK in the direction of a recession, Martin Bennison, Sales and Marketing Director at Pulse Cashflow outlines what we see as the challenges and how we are increasing our commitment to supporting businesses during these uncertain times.
What a turbulent time both businesses and consumers face. Rocketing inflation is driving the cost of goods through the roof as it hits a 40 year high and an energy crisis - collateral damage from the Ukraine conflict – are putting untold pressures on them. To counteract the rise in inflation and attempt to avert a recession, the Bank of England have been forced to hike interest rates to their highest levels in 14 years. Great for those with money in savings and investments but for those with mortgages or using credit facilities it doubles the strain.
We are seeing confidence levels dip with businesses reluctant to push forward their plans for investment and expansion and the housing market is beginning to stall. Some would argue we are already in a recession but if we aren’t and the figures say not yet, it is just round the corner.
But it’s not just inflation, rising prices and interest rate hikes. Businesses are having to deal with supply chain shortages which with the latest Chinese lockdown will only serve to make things worse, a labour scarcity, the aftermath of Brexit and a lack of alternative and robust trading agreements which all add up to make a cocktail of challenges!
Seeking out support?
All eyes were focused on the Governments Autumn budget. Businesses needed it to encourage economic growth, but the reality is that it had to deliver a range of tax measures designed to reduce the UK’s borrowing. The Chancellor sadi he has delivered a plan to tackle the cost of living crisis and rebuild the UK economy with his priorities focussed on stability, growth and public services. He believes he has provided ,“fair solutions” despite taking “difficult decisions." But what will it mean for the majority of SMEs whose resilience is being tested to the brink.
A challenging year! Businesses will find themselves burdened with rising costs and a pressure on cashflow. Our experience, and latest statistics show, that businesses have run through their Covid loan support schemes with the amount of cash being held on reserve by businesses returning to pre-Covid levels.
When cash is restricted, businesses will struggle to survive. Insolvencies rose by 40% in Q3 2022 over the same period the year before. What is interesting is that of the 5,595 company insolvencies in Q3 2022 the majority were small businesses most likely impacted by inflation driven cost increases across raw materials, energy costs and labour.
Looking forward, businesses need to act now to preserve cash. Forecasting cashflows into and out of the business is important and ensuring they have a sufficient supply of funds to keep their business moving is vital.
History tells us that in times of economic uncertainty, banks will revisit their lending policies, tightening their appetite resulting in a lack of access to funding and there are already signs that small businesses are being hampered by this just when they need cash the most.
Keep options open
Accessing finance is a common problem for businesses in turbulent times. The first option is to protect the funding facility they have in place if it is meeting their needs. Always raise the level of communication with funders to keep them aware of the current situation. That way they can ensure they are supporting the business as much as they can.
If the funding facility isn’t meeting needs or the funder has changed their appetite, then it’s wise to look around at not only different funding options but also funders who may approach the situation differently. A funder should ensure that they understand what the business wants to achieve and develop a solution to achieve that. Ensuring that a business finds the right and most flexible funding partner can be critical to their future success.
Pulse Cashflow committed to supporting SMEs
As a funder we have strengthened our commitment to supporting business through these tough times. With the strength of our parent company, we continue to grow the support we are providing to businesses and are now able to offer funding packages up to £5m providing our clients with fast, transparent, and fair funding facilities to support their businesses in these uncertain times.
Whether your clients are looking for increased working capital to cover rising costs, deliver an order, start a project, invest in new machinery we are here to help fund their plans.
We have invested in a wider portfolio of funding solutions to support a wide range of businesses and situations. From invoice discounting, invoice finance, trade finance to funding and back-office solutions. The majority of our solutions come with inclusive bad debt protection so that our clients can trade confidently knowing they will get paid even if a customer defaults on them.
Single fee unaffected by interest rate rises
Rising interest rates are a big concern for businesses who are using credit facilities. Pulse Cashflow offer a single transparent fee which is not affected by interest rate rises meaning our clients can plan their budgets with confidence knowing their rates will not change.
The Pulse Cashflow team remain focussed on helping businesses get the support they need and providing the certainty of funding that is vital in uncertain times. We are committed to being there for them over the coming months and years as we work our way back to economic prosperity.