As the end of another financial year in business approaches, 2022/23 has been a tough year for many. Following on from the pandemic there appears to be no end in sight for businesses struggling to remain viable. What happened in 22/23 to cause the difficulties and how can we expect the 23/24 financial year to evolve? We delve deeper and explore how commercial finance will be integral to supporting the future of your business over the upcoming 12 months.
According to the Guardian 22,000 businesses went into administration during 2022. This figure includes some big high street names such as Joules, Sofa Warehouse, but also online retailers such as Made.com, alongside thousands of lesser known small and medium sized enterprises. Heading into the new financial year the situation for many businesses continues to look bleak with the cost-of-living crisis meaning that many households are struggling to pay their essential bills, with subsequently less spending within the economy.
A Look Ahead to 23/24
In the United Kingdom there is an ongoing cost-of-living crisis, and discontent in many sectors with lack of pay increases and the struggle to pay basic bills. Real term pay in the UK has fallen; while wages have increased, costs are rising faster meaning that in real terms families are left with less disposable income. The knock-on effect of this is less spending on non-essentials including hair and beauty, eating out and other entertainment, travel, home improvements, and other similar industries.
Why Are Costs Rising?
Just over a year since the war between Russia and Ukraine started, energy and fuel costs soared, and remain high. This is one of the biggest factors affecting business and households in the UK right now. Energy and fuel costs are a double whammy because businesses are facing increasing costs and having to raise prices to cover those costs, but household bills are also rising meaning that higher costs for both essentials and non-essentials are increasingly unaffordable for many households. This one factor alone is likely to mean that 23/24 will be a difficult trading year for many organisations and we are likely to see an increase in insolvencies over the coming 12 months.
Weather, fuel costs, and imports following Brexit have also heavily impacted the food sector increasing the price of everyday staples. With increased food and fuel bills many families are left with no disposable income to spend on the high street. There are strikes within many industries as workers seek to address the cost-of-living crisis with better pay and working conditions. This is however, contributing to increased disruption within other areas, such as shipping, causing a knock-on effect of delays, further discontent, further price increases, and less willingness to spend.
How Can Commercial Finance Help?
It appears that the 2023/24 financial year will be another difficult one for many organisations. Commercial finance when used appropriately can help to support growth and diversification helping a business to remain viable throughout turbulent economic times. However, inappropriate use of commercial finance can have the opposite effect, making it difficult for a business to retain cashflow equity and subsequently fail.
One of the biggest causes of a business to enter liquidation, particularly SME’s, is lack of cashflow; maintaining liquidity is vitally important to success. Commercial finance can play a huge role in cashflow both positively e.g., a loan will provide an instant boost to cash flow, but also negatively in that repayments can place a large burden on incomings quickly eating into available cash.
How Can a Broker Help?
Building a strong relationship with an experienced commercial finance broker can be invaluable to company directors, we discussed this relationship in a recent blog and you can find out more here. Essentially, you are the expert in your business, a commercial finance broker has all the knowledge, experience, and expertise in finance, and utilising their support and advice can help to support your business success.
Without taking proper advice from a broker, you may inadvertently take the wrong type of finance, you may pay more interest, or get terms that are unmanageable. A broker such as MC Commercial Finance has a strong relationship with both the organisation, working in their best interest, but also the creditor. Knowledge means that a broker is best placed to review the individual situation of each business and offer advice as to the most appropriate type of finance, they also have access to broker only rates and deals and will have a good understanding of the creditors regulations meaning that an application is more likely to be successful.
Obviously, failing to maintain repayments on a loan or another type of credit will be a big cause of many organisations going bust in 23/24. By taking advice from a commercial finance broker, you may be able to utilise finance to grow and diversify where appropriate despite the bleak economic circumstances in the 23/24 financial year. Book an appointment with MC Commercial Finance and start building a strong relationship with your broker today.
MC Commercial Finance Ltd is authorised and regulated by the Financial Conduct Authority
(Reg number 948719).
MC Commercial Finance Ltd is an independent credit broker not a lender.
Company Registered Number: 12472873