What small business owners and directors need to know

Summer is officially here and 2022 shows no signs of letting up for business owners as they are hit with the double whammy of rising energy prices and a hike in interest rates.

A recent survey commissioned by Barclays bank has shown that three quarters of responding small and medium enterprises (SMEs) are worried about what the long term impact of the cost of living crisis, soaring energy bills and an increase in inflation will have on their business. 

Barclays’ SME barometer is a quarterly survey of business sentiment among their corporate customers and also found that 51% of responding SMEs said that they were concerned that rocketing prices would dent consumer spending in the near term. 

With the rise in energy bills and higher raw material costs there is an increased pressure on businesses adding to the already challenging trading environment. Over a quarter of the 574 firms surveyed said they feared that having to increase their own prices in response would make them less competitive as a result.

It has also been reported that there is a tight labour market putting further pressure on businesses leaving a variety of industries, from skilled trades to transportation, unable to fulfil vital roles and having to pay their top employees more to keep them.

Barclays and other business lenders are paying particular attention to their corporate customers as it was revealed that UK banks had written off nearly three quarters of the value of outstanding business loans in the last quarter of 2021. 

The value of loans written off by banks rose 87% from £190 million in Q3 2021 to £356 million in Q4 2021.

While the Treasury introduced schemes such as bounce back loans and CBILS during the pandemic to support small businesses, many companies also explored other avenues of lending for support including business loans. 

As the pandemic support was ultimately tapered down and withdrawn, business loans became an even more attractive option but the write down figures indicate a bigger problem when it comes to repaying loans that, unlike bounce back loans, are not guaranteed by government. 

Commenting on the figures, Chris Horner, Insolvency Director with BusinessRescueExpert  said: “Like corporate insolvencies themselves, one of the effects of the pandemic was to artificially subdue normal business operations. 

“Now all the support measures have been removed, the rise in business loan write offs was inevitable and it doesn’t need to be said, will make obtaining future business lending harder as it will already become more expensive with rising interest rates.

“With increasing headwinds across the economy growing, many businesses need to look at their financial forecasts and plans for the next few months carefully as rising taxes and other bills could make them simply unfit for purpose. 

“We’d advise any business that was having trouble making their borrowing repayments to get some professional advice and sooner rather than later.”

So what can you do if you are worried about how the impact of rising energy prices and interest rates will do to your business?

You can book a free, virtual consultation with one of our expert advisors for a time and date that’s most convenient for you.

Working closely together they’ll explore all the options that are available to you – both immediately and in the longer term.

They’ll be clear and up front about what you can do and what you will have to do to successfully implement any changes that are needed. 

Fortunately, the first and easiest decision is still yours – and that’s to get in touch with us right now!