Chirag Shah, CEO and Founder of Nucleus Commercial Finance

Today’s highly inflationary environmentposes a clear challenge for scale up businesses: How do they continue to meet their ambitious growth targets as prices continue to spiral upwards. 

Despite the tough economic backdrop, the latest quarterly Barclays SME Barometer reportsthat just over halfof UK small and medium businesses actually saw revenues increase in Q2 this year and54% expect turnovers to increase further by the end of Q3. Bolstered by this growth,a thirdof this group increased their number of full-time employees in Q2, recruiting an average of seven new employees each during this period.

But in spite of some positive signalling from the sector, it’s very clear there is an uphill battle ahead as UK businesses – particularly SMEs – grapple with soaring costs.Our own research found that 80% of UK SMEs expect business costs to rise over the next 12 months, with the average expected rise being 18% – and 74% of this group feel worried about the prospect of rising business costs during this period. Worryingly, the most popular ways these businesses anticipate mitigating rising costs is increasing their customer prices (43%), delaying planned investment in staff training and development (26%) and postponing planned investment in tech and/or infrastructure (also 26%). 

The SME sector acts as the engine room of the UK economy. As business costs continue to surge across the board, ensuring the sector not only survives but canalso seize opportunities that come their way is key. In order to invest back into their staff, attract and retain talent; it’s essential that they have access to rapid, targeted, and reliable finance. 

Our recent survey of SME businesses made clear the appetite for additional finance to counter rising costs and yet, just 38% say they are confident about being able to access this in the next 12 months should they need it. However, here at Nucleus Commercial Finance we are committed to helping close this access gap. With the launch of our one-of-a-kind, data-driven tool Pulse, we facilitate accessfor SMEs to gainthe insights needed to grasp growth opportunities as they arise. SMEs can also create bullet proof loan applications with access to all the right information, in a way that lenders want it, as soon as its required. 

Going further, a joined-up approach and focus from the new Government and specialist finance providers to work together, raise awareness, and improve access to affordable financial support is also key. And, in the immediate term, having further financial support packages from the government or clear routes which will help relieve some of the cost tensions felt by businesses, would go a long way to protect more small and medium firms this year onwards. 

Whether we see further government support come to fruition via a possible reversal of the recent increases on national insurance contributions, or reductions in business rates and/or VAT charges for small firms is not yet clear. And yet, in the interim, there are several key business cost pressure points firms – whatever their size – can address themselves.

Firstly, it’s a very good idea to review current suppliers to potentially start cutting down on some costs. Small businesses can also claim a tax deduction for all business-related vehicles used for work (personal vehicles are classed as anything used for travelling to and from work). This covers not just cars, but also motorcycles, vans and even bicycles. While claiming directly for fuel costs isn’t an option, this can be a way to ease transportation costs.

For some, passing on higher costs to customers and clients will be unavoidable. So, careful consideration of how this decision is communicated is very important. This can be done by strengthening theoffering of the business by identifying what differentiates the product line from other competitors’ and communicating these USPs throughout the brand messaging. 

Cash reserves, while difficult to accrue in the current climate, are vital to cope with unexpected payments, as well as the expected energy hikes in October. 

To build towards this, reviewingthe balance sheet early on and forecasting how much cash is needed to cover all eventualities for the next 3, 6, 12 months is worthwhile. 

It’s also a very good idea for business owners to review funding facilities and ensure they’re accessing the best type of funding with the most competitive terms, and whether the business is credible for a government-backed loan.

This last step can be crucial. According to a recent study, over 50% of UK business owners don’t know the best option for financing their start-ups – which worsens among younger demographics with 57% of owners under the age of 35 admitting that they do not know where to turn when it comes to acquiring external business finance or funding.

Fundamentally, UK businesses won’t be able to grow successfully if the finances are not well maintained. In doing this, it greatly reduces the chance for things like financially induced stress to occur, which could distract from the key objectives and achieving sales targets. Business loans, such as those offered by Nucleus, are available for a variety of business types and needs, as the extra finance can help companies reach new targets, bolster growth, or cover any high business costs.