Business Energy Prices are Surging

How SMEs can limit the impact

Business Energy Prices are Surging.  You will have seen the bleak forecasts and there is little doubt a challenging winter is in store.  However, help is available for small firms. 

With revenue-based finance, small & medium sized enterprises can limit the impact of the rise in business energy prices by controlling cash flow and reducing operating expenses.

Since the start of the Pandemic, 87% of small business owners reported losing an average of £20,981 over the last two years. 

They have already had to absorb the increase in prices seen during the second quarter of 2022 and many business owners are anxious about the upcoming quarter. 

The prolonged crisis will have an impact on households and businesses alike, but SMEs are especially at risk. Even reasonably predictable swings in cash flow can be difficult for small firms without the capital buffers available to larger corporations. 

Revenues in the hospitality and leisure industries naturally fluctuate with the seasons.  Although an unprecedentedly high rise in business energy prices is expected hit this sector particularly hard.

Some businesses are facing a 600% increase in their energy costs. It’s understandable why 11.5% of firms (up from 9.1% in the previous quarter) requested loans between April and July of this year. 

Traditionally, smaller firms have always had trouble getting loans from conventional lenders. These difficulties have only been exacerbated by the current crisis.

Business Energy Prices | Traditional support is insufficient.

Consider this Case Study for example:

Just before the epidemic, Brenda launched her milkshake & smoothie bar and despite Covid-19, business has been brisk.  

She set up a cart to serve customers on their regular walks, making the most of a summer without lockdowns.  

In addition, she also supplies local retailers and the great quality of her product has attracted customers throughout the winter.

She had her greatest quarter yet in the first three months of 2022.

Brenda is, however, one of many business owners who are concerned about the rising cost of energy. 

Even in the best of times, she struggles to pay her staff and bills, since producing, chilling, and distributing her product range consumes a lot of energy. 

As her overhead costs rise, she requires credit to continue operating, till the economy stabilises. 

Yet, she has few options with conventional lenders.

What are the issues?

• Speed is a significant issue.  Small firms like Brenda’s can struggle to anticipate when their cash flow will be so low that a loan might be necessary.  Although, when it occurs, they urgently need the money.   Yet traditional lenders are often unable to provide financial support in the timescales required, if at all.

• Complexity is another barrier. 57% of all SME credit applications are abandoned because they are too long & difficult to complete.  Furthermore, traditional lenders frequently rely on credit checks, which only consider revenue and operating history, records that a successful but fledgling SME like Brenda’s is unlikely to have.

Small firms also often avoid seeking credit due to the perceived high interest rates and repayments. 

A fixed interest rate is a major hurdle to borrowing for a business like Brenda’s because revenue is expected to vary seasonally and net profits are particularly vulnerable to energy costs increases.

Traditional financial solutions need modernising now more than ever as the energy crisis starts to bite.  This was already the case considering the other serious issues facing business owners like inflation, seasonality and the lingering effects of the pandemic.

How revenue-based finance might help

A company like Brenda’s is likely find the current economic climate a real challenge.  However, with easier access to business financing, she may be better positioned to weather the storm.  

At Breathe Payment, we have partnered with a specialist lender to offer a fast Cash Advance facility perfect for small and medium sized businesses.  

As finance is based on card transaction turnover the application is simple and straight forward.  The use of conventional credit checks is no longer a barrier to funding approval. 

Funds can be disbursed in a mater of couple of days rather than weeks.

Firms with erratic revenue don’t have to worry about high interest rates.  They can pay back loans using a percentage of their income rather than a fixed rate.

Perfect for a Business like Brenda’s.

For more information visit:

Cash Advances for Small Business

or 

Call us on: 0203 827 2870