By Alex Beardsley, MD at ABL Business in Cleckheaton

As the economy seemingly moves further towards a recession and the level of market uncertainty keeps even the hardiest of business owners awake at night, many of us running businesses are really starting to worry.

There are several factors outside of our control that have the potential to make costs spiral, and the constant political U-turns, increasing interest rates and hikes in the cost of raw materials continue to make for a very uncomfortable ride.

Many businesses have, sensibly, hedged their energy, and ensured there are clauses in contracts to allow for negotiations with key customers should they need them. This means some of the costs outlined above can be passed onto customers, to slightly lessen the impact of the blows it feels like – right now – we’re constantly being dealt.

However, there are still many businesses that are fighting the very real battle of paying ever-increasing bills with little or no way of recouping these costs through their customers. Lots of these businesses are SMEs – which form the backbone of our economy. They seriously need working capital to plug cashflow gaps; and they need it now.

But the need for quick cash is leaving businesses vulnerable, and there are some key considerations that can prevent these companies creating a serious long-term problem by using the wrong short-term finance solution.

The first of which is to start planning for a shortfall, now. Even where a business has enough cash reserves and has a robust forecast in place, it’s prudent to take just a brief look at what finance options could be used to provide that all-important cushion in case of a cash flow gap. Doing this preliminary research to have on their radar what is available, could be the best thing a business owner or finance director does this year.

In October the commercial finance market saw a reduction in the number of fixed rate commercial mortgage options, followed by several lenders pulling out of the market, and one “Neo Bank” closing its doors altogether.

This could mean many businesses find themselves in a situation where they are asked to move away from their finance facilities; not because the business itself is in distress or defaulting, but purely because they are breaking the covenants imposed by the lender as part of their new ‘stress’ testing models.

Yet again, a rise in interest rates, increasing energy costs, and a review of the lender’s portfolio all combine to create an outcome that causes another headache for businesses and leaves owners, founders and entrepreneurs scratching their heads as to why they are in this position – through no fault of their own.

Businesses will always need access to finance, but in times of such severe uncertainty, it’s the way they access it that will make all the difference to how they weather this long-term economic storm.

Now more than ever, they need an independent view of the market to make informed choices. They need informed advice – from a real person – on the pros and cons of every product, and they need to be able to access lenders across the market to get them what they need, when they need it.