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Three unexpected reasons for SMEs to be upbeat

Paul Surtees Nov 24, 2017

These are turbulent times for the UK. Concerns amongst the business community - most of which revolve around the uncertainty of Brexit - are worrying some SME owners and entrepreneurs. But times of stress and uncertainty can also be times of great opportunity.

To put a positive spin on things, we’ve taken a look at three of the key challenges facing British SMEs and explained why they could be good news for you and your business.


The opportunity of Brexit

Nothing is causing more uncertainty for the UK economy than the decision to leave the EU. However, this uncertainty could mean opportunity for ambitious companies willing to take some risk in order to bet on a long-term future that could be more prosperous than the present.

Attitudes towards Brexit in the SME market remain divided, but the good news is that SMEs are not being forgotten. In fact, the reality is that SMEs are at the very heart of the reason why many think the UK will come out of the other side of Brexit better off.

Prime Minister May has made assurances that cuts incurred by SMEs as a result of Brexit will be replaced, and that SMEs will be at the very heart of the government’s renegotiation strategy. She stated: “Britain’s 5.5 million small and medium-sized businesses provide people with jobs, put food on families’ tables and underpin the strength of our economy. They are a fundamental part of my vision of building a country that works for everyone.

So whilst Brexit poses unanswered questions - especially around access to the single market and trade deals with non-EU markets - it’s reassuring to see the SME community at the heart of Britain's post-Brexit ambitions. Further, opportunities for SMEs - such as trade opportunities with the USA, for example - should offset any fears, and promote positivity around the topic of Brexit.


Rising rates aren’t a reason to be fearful

Last month, given the spectre of inflation in the UK economy, the Bank of England (BoE) raised interest rates, lifting the base rate from 0.25% to 0.50%. Given that this was the first rate rise since 2007, this could be cause for concern amongst some SMEs who, for a time, will see rates of borrowing increase and for consumers who may have less money to spend at the checkout.

But it’s important to understand what the BoE are looking to achieve. In this case, a rate rise is being used as a tool to curb inflation, which is being driven by a fall in the value of the pound. But the pound’s demise is heavily linked to the ongoing confusion around Brexit, which has led to higher import prices for UK business. But this opaque situation should reach a clearer solution in the coming 6 to 12 months. At the very least, we will have more clarity about where Britain is headed in that time. Consequently, economists are predicting that the spike in inflation is temporary, and following a cautious hike in rates, it should fall back in late 2018.

So the key here is for businesses not to be alarmed. The meagre quarter percent hike is likely all that the BoE is going to do, for the time being at least. Whilst your competitors might be panicking about where rates are headed, focus on preparing your business for the end of the Brexit confusion that should cause inflation to drop away and may well open up growth opportunities as Britain’s future path becomes clear. If your business can keep their heads during these turbulent times, it will be well placed to take advantage come the end of 2018.


Alternative lending filling the void

Corporate finance is crucial for the prospects of all SMEs. Given the uncertain outlook surrounding Brexit, coupled with a rise in interest rates, it’s easy to see why some SMEs are beginning to worry that they might not be able to obtain funding they require.

Increasingly, SMEs are being shut out of the traditional lending market. It’s reported that nearly one in four SMEs found it difficult to secure the funding they needed on acceptable terms – of those, 75% said this was a barrier to growth.

But good news is at hand, namely the fact that alternative sources of funding are continuing to mature, offering businesses flexible, affordable lines of credit when more traditional financing options become less viable. For example, peer to peer lending is flourishing. P2P grew in the turbulent years after the ‘08 financial crisis, offering funding when traditional sources did not. This resilience and flexibility is a core part of P2P. It means that P2P platforms see turbulent times, such as those right now, as an opportunity to help business owners fund and grow.

So the good news for SMEs is that P2P platforms - and other forms of alternative lending, such as crowdfunding and invoice financing - continue to offer solutions. At Capitalise.com, we enable SMEs seeking between £25k and £2m to find, compare and select matching lenders. So we’re proud to be a part of this maturing alternative lending space, too.

So, much of the bad news swirling around in the business and financial press could, in fact, be good news for bold, ambitious SMEs who are willing to prepare for what’s ahead and proceed with a positive outlook. Sure, these are uncertain times, but uncertain times are also times of great opportunity. All it takes is a little positivity



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