23 June 2022

Maintaining healthy finances post-pandemic is a key challenge for businesses across the globe. Almost a third of business leaders in the UK have been forced to seek additional cash due to soaring costs, with 24% taking on higher debt to deal with the situation, causing a burden on the banks. But are our finances beyond repair? What can we do to break the constant cycle of financial uncertainty?

A study by accountancy firm BDO revealed that UK businesses are increasingly seeking additional finance and taking on higher debts to combat soaring inflation, rising energy bills and growing operational costs, with the sharp rise in costs the most significant problem for around half of medium-sized businesses in the country.

But with such high volumes of businesses seeking financial help, the banks are feeling the pressure, which has made the sourcing of extra cash particularly challenging.

Banks “pulling up the drawbridge” to small firms will further stifle economic growth as successful finance applications have plunged over the first quarter of this year, finds SBI, the UK’s largest business group. Fewer than one in ten (9%) small firms applied for finance in the first quarter, the lowest proportion since SBI records began. The share that saw applications approved (43%) is also at a record low.

Of the few firms that did manage to secure finance…

  • 42% plan to use credit to manage cash flow
  • The majority (61%) sought traditional overdraft and/or loan products
  • A quarter applied for asset-based finance, such as invoice finance, with smaller numbers seeking funds through peer-to-peer platforms (7%) and/or crowdfunding (5%)

One of the biggest issues businesses tackled during the Covid-19 pandemic was cash flow and cash flow management, which resulted in some businesses folding early in the pandemic due to a lack of sufficient cash reserves, Forbes reports, so it’s no surprise that this problem continues post-pandemic.

According to Bibby Financial Services’ (BFS) annual SME Confidence Tracker survey, more than a quarter of businesses (26%) highlighted cash flow as a concern in 2022. Almost one in five (17%) said they need cash flow support more now than before the pandemic and 9% said that they don’t even have the cash flow they need to operate on a day-to-day basis. The research shows that profitability is on a knife-edge, where one in 10 - equivalent to more than 500,000 SMEs - say they are operating at a loss.

In addition to seeking funding solutions, businesses should also be focusing on their aged debt and delinquent debtors. Reducing overdue balances, bad debt and debtor days can help to release cash and improve cash flow. At Breal CM, we help our clients manage their finances effectively. Our experience, expertise, and technology allow us to act effectively and efficiently to resolve the pinch points impacting recovery. With a humanised, consultative approach that’s supported by technology, we’re able to apply our creative solutions to the most complex credit management and debt recovery challenges.

To find out how our unique approach can help to support and deliver specially tailored solutions for our clients in a time of need, call 0330 0430282 or simply email us at info@BREALCM.com.

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