Flexible lending can help UK SMEs to adapt and grow despite recessionary forces

With the government announcing that the UK is already experiencing a recession, the question now is just how it will impact businesses, and what they can do to continue to adapt and grow when faced with a less optimistic economic outlook.

UK businesses have already experienced several economic upheavals over the past few years. These include supply chain issues due to Brexit and the Coronavirus pandemic, with recent chip shortages in the tech sector highlighting this on the global stage. Exports have also become increasingly difficult as the UK departed the EU’s Single Market, leaving many businesses grappling with new export documentation and trading backlogs.

Brexit and the pandemic have also hit the labour market, with some workers returning to their home countries, whilst the move to hybrid working patterns and societal changes have all made it more challenging for businesses to hire new people.

Now, with the current economic headwinds from the global economy, and with the Autumn budget doing little to appease anxious SMEs across the UK, it’s understandable why business and consumer confidence is continuing to fall.


Opportunities still remain

Under such conditions, it can be easy to feel a sense of pessimism about the economy, however, that doesn’t mean there aren’t still opportunities for businesses to continue to adapt, grow and succeed.

Various industries are still performing relatively well at the moment, presenting opportunities for businesses who are willing to adapt their strategies to the changing market.

One notable example is renewable energy, which remains an opportune sector for business growth. Ever increasing international pressure on nations to move to renewable energy means the topic remains at the top of the news agenda, with environmental organisations and consumers rightly placing increasing pressure on businesses to develop an ESG strategy. What’s more, with countries now moving away from Russian oil and gas, this has created ample opportunity for businesses operating in the renewable energy sector to capitalise on increasing demand and experience strong growth. At Cynergy Business Finance, as an example, we recently provided a facility to Puredrive Energy, a solar energy battery storage business, whose growth trajectory displays the global appetite for such products and that continued innovation and investment into renewable technologies is so crucially important.

The growing renewable energy sector also presents opportunities for other fields as well. Not only will businesses operating in renewable energy supply chains likely experience growth, but businesses that align themselves with a green agenda and incorporate sustainable practices and products into their offering can also benefit. There is an increasing consumer demand for companies that adopt sustainable practices, so businesses that can effectively tap into this can experience relative growth.


The impact of adverse lending conditions

Despite there still being opportunities to adapt and grow during harsher economic conditions, it can be difficult to find the funding to support any those plans. We’re already seeing the credit appetite of some funders becoming more conservative, limiting access to funding support. As we head into 2023, with interest rates widely speculated to further increase and the likely subsequent falls in consumer confidence, lending conditions across the market are likely to worsen too.

However, during times of economic downturn it’s essential that businesses can continue to access reliable funding, not only to support their own growth, but to aid recovery within the wider economy. Funders can help businesses to take advantage of current economic opportunities, and their support is essential to businesses looking to adjust and redirect priorities, helping them to weather tougher economic conditions.


Asset-based lending opportunities

Whilst some funders may be more reluctant to provide support there are still plenty of other funding providers who remain open for business and willing to help UK SMEs. Asset-based lending, which we provide at Cynergy Business Finance, is one option that is often a more flexible choice for businesses seeking to adapt and grow.

Asset-based lending allows businesses to secure funding against a variety of company assets, including invoices, inventory, plant & machinery and property. This tailored approach often helps businesses to access a larger funding line to give them the best opportunity to succeed, giving them the chance to capitalise on any new opportunities within the market. It helps businesses who may otherwise be overlooked by traditional funders to receive the support they need to maximise success.

The tailored approach of asset-based lending also often requires those funding partners to take a more personal approach, offering more unique support that reflects the varying needs of businesses. Particularly with the volume of issues UK businesses are currently facing, each business has differing needs that need to be met to give them the best chance to succeed. Asset-based lending provides support that caters to the individual business need, and that can be adapted over time to change with the business, helping even during uncertain economic conditions.

The UK is set for a tricky road ahead, with the recession creating further uncertainty for businesses. Given this, the continued support for SMEs through the provision of financial support remains crucial, not only helping on a micro level, but ultimately helping to strengthen the wider market as SMEs can continue to adapt, grow and succeed. As widespread government support looks less likely after the recent Budget, funding providers hold an important role in aiding economic recovery.

All comments to be attributed to Ted Winterton, Managing Director at Cynergy Business Finance.


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