For years finance for SMEs has been viewed primarily as a factor for growth, expansion, acquisition or investment. As we now move into the new financial year, especially in the current economic climate, that conversation is shifting.
This April is bringing a wave of cost pressures that will be felt across the SME community. Rising minimum wage, changes to National Insurance thresholds, tax adjustments, allowance revisions and ever tightening compliance requirements are all landing at once. For businesses that may already be operating on tight margins, especially those in sectors like retail and hospitality, this challenging mix will likely create a crunch point for the business.
Recent weeks have added further stress for small businesses, with the current conflict between Iran, the United States and Israel impacting oil prices, inflation and interest rate cuts. The drastic rise in global oil prices will hit businesses operating in fuel-dependent sectors hard, with the higher pump prices impacting operating costs and creating increases that many will struggle to pass onto customers.
Paired with this are the predicted increases in gas and electricity prices that are expected to hit in the coming months, meaning businesses will somehow have to find the funds to cover this unexpected expense.
On a wider level, inflation and interest rate reviews will also be impacted, with the planned fall in inflation now incredibly unlikely, and some analysts believing inflation could shoot back up to 3%(1). This will potentially delay or stop interest rate cuts throughout 2026, slowing investment, hiring and expansion for many businesses.
For many SMEs, finance is no longer just a growth lever, it’s a survival tool. At Reward, we’re already seeing this shift in the conversations we’re having with SMEs. Increasingly the focus isn’t just on funding growth plans, but on maintaining stability as costs rise.
THE NEW FINANCIAL YEAR, PRESSURES FROM EVERY ANGLE
Cost pressures at the start of a financial year are nothing new. What feels different this time is the scale and timing of the changes. There is more pressure on businesses, tighter margins, more changes coming at once and less access to finance from many traditional routes.
The minimum wage increases drive up financial commitments overnight without any new employees, and national insurance and tax changes immediately impact net outgoings. Pair this with tightening compliance requirements, which require more time and resources from owners and managers, and it is creating the perfect storm.
For many SMEs, including those we deal with on a daily basis, the question is no longer ‘how do we access finance to fund growth aspirations’, but rather ‘how can finance help us maintain stability while these changes come through’. Proactive assessment is a must, because reactive firefighting will no longer keep a business afloat.
CASHFLOW FORECASTING IS A KEY PLANNING TOOL
One of the most important things SMEs across the UK can do at the moment is master cashflow forecasting. In difficult conditions, like the ones we are experiencing, profit is an aspiration, but solid cashflow is a necessity. Businesses need absolute clarity on when cash is coming in, when it’s going out and where pressure points may emerge.
Effective forecasting means building a rolling 12-month view of cashflow and stress-testing different sales scenarios, mapping out financial commitments ahead of the April changes and identifying times where headroom tightens so that plans can be created in advance.
If you cannot answer when cashflow pinch points may hit, then that is the first thing to address. Too often, businesses only start funding conversations once the pressure has already arrived. However, in having a planned approach businesses can secure a facility from a strong position, rather than one of urgency.
WHERE IS THE CURRENT LANDSCAPE?
In recent months, especially since the financial year announcements that came from the October budget, we have seen a noticeable shift in the reasons behind funding needs.
Increasingly, businesses are approaching us for stability driven solutions, rather than expansion or growth plans. Some examples we’ve had are:
- Funding to support day-to-day wages ahead of the April increases
- Short-term cashflow bridging to manage tax requirements and outgoings
- Refinancing existing structures with traditional lenders that are either no longer interested in the specific industry or are uninterested in supporting the business anymore
- Facilities to support seasonal business or sector specific volatility
These findings align perfectly with our 2026 outlook, that alternative finance will continue to move into the mainstream. More businesses are recognising that the flexibility offered by alternative lenders are more suitable for the needs of evolving businesses, whereas traditional lenders may not be structured to deal with the complexity of the deal or time-sensitive nature. Plan alternative is becoming plan A.
High street banks of course remain an important part of the ecosystem. Yet they are often constrained by processes, policy and a lack of appetite for risk. In an environment where circumstances can change in a matter of days, speed and flexibility are key components to any deal.
STABILITY FIRST, GROWTH SECOND
Growth will always remain an important part of business, but ambition should not disappear if growth is not happening, especially in challenging conditions like those we are experiencing.
Stability simply must come first. Without a solid foundation, strong cashflow visibility, funding resilience and operational facility, growth cannot be built.
Businesses must think differently about funding, because standing still is a risky place to be. When traditional lenders pause, Plan Alternative moves forward. Alternative finance is no longer a niche solution for specific situations, it is a strategic choice for SMEs in need of speed, flexibility and a deeper understanding of a business.
The new financial year is not just another date in the fiscal calendar; it’s a reset point. A chance to look at the wider picture, review the current business position and devise a plan moving forward. If that involves finance to underpin survival for a specific business, it is certainly not alone.
HOW CAN YOU PREPARE FOR THE FINANCIAL YEAR?
Business leaders should be asking themselves some key questions ahead of the financial year.
1. Where is your cashflow pinch point likely to hit?
Create a forecast map to understand the impact of April’s cost increases. Look at what will impact your business and by how much to get a clear picture.
2. What costs will be changing in April and what delays could this cause?
Will increases to minimum wage hit your profit margins? Could compliance tightening take up valuable time for key projects?
3. If you have a current lender, do you have a Plan Alternative?
Funding that felt secure may not be so solid when renewals hit, especially if your business is in a complex sector such as retail or hospitality. Do you have a plan in place should your current lender step away?
4. Do you have access to flexible funding?
If an opportunity arises, do you have flexibility with your lender or generally in your business to act on it?
