By Jennifer Sieg
Ongoing funding challenges for small and medium-sized enterprises (SMEs) are beginning to cause some business owners to sacrifice the way things work.
New research by Nucleus Commercial Finance suggests SME confidence in stalling – now sitting at an average 40.1 out of 100, where a reading under 50 represents a slip in confidence – due to worries of inflation, rising operational costs and uneasy cashflow.
Of the 1,500 SMEs surveyed, 79 per cent said they are encouraging remote workers in hopes to save on these business costs.
The sacrifices come as SMEs continue to face ongoing funding challenges, a trend that has long been seen since traditional banks began tightening their lending criteria.
Chirag Shah founder and chief executive of Nucleus Commercial Finance, said businesses can save as much as £8,000 a year for every employee working from home.
And while having extra cash can come have some advantages, Shah said the decision comes with its “challenges”.
Shah added: “Having entire teams working from home permanently can come with challenges, including company culture and communication.
“It can also prove more difficult to train new staff without the benefit of an office environment. In addition, there are cybersecurity risks to consider like unsecured networks and potential data breaches.”
While circumstances for each business owner vary, financial stress can cause businesses to make “short-term decisions” that are harmful in the long run, Shah said.
A recent survey of over 1,200 businesses, conducted on behalf of the2023 UK StartUp Awards and Starling Bank, showed that 85 per cent of start-ups that launched in the last three years have relied on personal capital for the initial source of funding.
The same survey suggests marketing and sales support are among top concerns, with campaigns often being the first to be cut when in a pinch.
“Understanding what your customers want and how your business functions can help to ensure that your funds – and other resources – always go to where they can make the most significant positive impact,” Shah said.
“And while this is beneficial at any time, it becomes essential during economic stress.”
As part of the Treasury Committee’s ongoing investigation on the funding disadvantages SMEs face, banking trade body UK Finance submitted evidence in September to suggest lenders have the “capacity and willingness” to help SMEs access the finance they need.
