UK Businesses are under pressure – but they’re finding a way forward

Matt Speed, Head of Sales, Pulse Finance

UK Businesses are under pressure – but they’re finding a way forward.  With profitability squeezed, costs remaining stubbornly high and traditional funding routes not always delivering, UK businesses continue to face challenging times. But I believe there are reasons for cautious optimism – and a growing role for independent funders willing to look beyond the numbers.

There is no shortage of challenges facing UK businesses. Rising employment costs, persistent pressure from energy and fuel prices, and an uncertain economic outlook are all taking their toll on profitability.  But speak to the people working directly with business owners and a more nuanced picture emerges. Yes, businesses are struggling. Yes, cash flow remains a concern. But there is also a determination to keep moving forward.

I recently joined independent funding provider Pulse Finance as Head of Sales, and the resilience that I see is one of the most striking features of the current market.  Everyone is struggling to some extent, and we’re seeing businesses that are financially challenged, particularly around profitability, but many are still forecasting an improvement over the next couple of years. There is however an underlying optimism, even if it’s difficult to pinpoint exactly where that’s coming from.

It’s an interesting contradiction. The economic fundamentals remain difficult, yet businesses continue to plan, adapt and find opportunities.  And perhaps that says more about the resilience of UK SMEs than any economic forecast.

Survival first, growth second – but ambition hasn’t disappeared

For many businesses, the immediate priority is stability rather than expansion.  Higher employment costs have added to already stretched overheads, while energy and fuel remain unavoidable expenses. Margins are under pressure, and the prospect of further increases in the cost of doing business is doing little to restore confidence.

Looking forward, I’m not expecting a dramatic turnaround.  I don’t see a fundamental change in the factors that have been affecting businesses.  I think that the next 12 months will be more of the same.  Yet what encourages me is how businesses are responding.  We’re seeing businesses winning contracts, securing orders, developing new products and looking at different markets. They’re thinking creatively and finding ways to adapt.

Rather than simply waiting for economic conditions to improve, business owners are looking for ways to improve their own circumstances.  And whilst some companies will inevitably struggle to survive, many of the businesses that we speak to may be struggling but are looking forward and looking for ways to ensure they have continuity of cashflow to not only survive but to thrive.

Many have sound underlying operations and genuine commercial opportunities but are finding it difficult to translate those opportunities into sustainable cash flow.

For the funding industry, that distinction matters.  A business experiencing short-term financial pressure is not necessarily a business without a future. And understanding the difference can be critical.

A crowded funding market – until things get complicated

The invoice finance market is competitive. For established, profitable businesses with straightforward funding requirements, there is no shortage of providers looking to lend.  But move away from the conventional lending criteria and the picture changes. The mainstream invoice finance market, particularly the space just below the banks have many funders competing for the same type of business.

The situation is very different for companies dealing with profitability challenges, changing banking relationships or more complex financial circumstances. Where Pulse Finance sits in the market, there are far fewer independent funders of our size. That’s one of the things that attracted me to the business.  It’s an important point for brokers and professional advisers.

While there may be plenty of funding options for a straightforward transaction, finding the right home for a more challenging case can be considerably harder.  And those are often the businesses where the right funding solution can have the greatest impact.

Banks may have the appetite – but can they deliver quickly enough?

A familiar frustration in the funding market is the gap between a lender’s stated appetite and its ability to deliver.  Banks will tell you the appetite is there, but the difficulty is often how long it takes to get an answer.  For some businesses, that delay is an inconvenience. For others, it can become a serious problem.

The distinction often comes down to why a business is seeking funding in the first place.  If a business is looking to reduce its funding costs, it can afford to shop around and find the best deal. But if it’s being managed away by its bank and needs a new facility quickly, the priorities are very different.

In those circumstances, price can become secondary to certainty, responsiveness and the ability to complete a transaction.  It’s about getting the deal done.  And whilst the immediate requirement may be to secure a funding solution, the longer-term opportunity is to help the business regain stability.  Give Pulse Finance 12 months working with a business, and we have the opportunity to demonstrate what we can do for them.

For brokers managing time-sensitive or complex funding requirements, that combination of commercial understanding and decisive action can be particularly valuable.

Looking beyond the balance sheet

It was this part of the market that convinced me to join Pulse Finance.  Having assessed the opportunities within the alternative finance sector, I saw a business positioned to support companies that may struggle to meet the criteria of more conventional lenders.

The main reason I joined was the opportunity to work with Martin Bennison again, alongside the exciting prospect of collaborating with Toni Dare and the wider Pulse team.  But I also looked at where Pulse Finance operates in the market, and I felt it was a great place to be.  The appeal was not simply the opportunity to arrange funding. It was the ability to take a more considered view of businesses facing financial challenges.

There are companies that are struggling with profitability, but we can take the time to understand their circumstances. If the underlying debt is good, there may still be a funding solution.  That willingness to understand the wider business, rather than focusing solely on historic financial performance, is particularly relevant in the current environment.  A business may be experiencing margin pressure or a difficult trading period whilst still having a strong customer base, a sound debtor book and opportunities for future growth.

Those are precisely the situations where an experienced, flexible funding partner can add value.

Why relationships still matter

One of the things that has particularly impressed me during his first few months at Pulse Finance is the way the business manages its client relationships.  In an industry where service levels can vary considerably, Pulse Finance has deliberately structured its operations around smaller client portfolios and closer day-to-day contact.

Our Relationship Managers look after no more than 20 clients each.  Compare that with a bank Relationship Manager who might have 80 clients to look after. It makes a huge difference to the client.

That difference goes beyond simply being available to take a phone call.  For businesses operating in challenging conditions, close relationship management can be an essential part of maintaining a successful funding facility.  It allows potential problems to be identified earlier, conversations to happen sooner and solutions to be developed before difficulties escalate.

It means we can provide a premium service, but it also means we’re close enough to our clients to understand when they’re facing challenges and help them manage their way through it.  This is particularly important when supporting businesses whose financial position requires a more hands-on approach.

Flexibility in funding is valuable, but it needs to be supported by the operational capability and relationships to manage that funding effectively.  And that is an area where I believe Pulse Finance has a genuine advantage.

Challenging conditions create opportunities for the right funders

I am under no illusion that the next year will be easy for UK businesses.  The pressures on profitability are likely to remain, and continued uncertainty around costs and economic policy will make planning difficult.  But I also see a market full of businesses that are determined to succeed.

Businesses are winning work, developing new products, exploring different markets and finding creative ways to protect their futures.  What many need is a funding partner that can recognise the strength of the underlying business, even when the financial picture is less straightforward.

The economy is going to remain challenged, but that creates an opportunity for Pulse  Finance to support businesses that other funders may not have the appetite to help.  For brokers and advisers, the message is clear: a difficult financial position does not automatically mean a business is out of funding options.

And for businesses with the right foundations, access to flexible funding and a genuinely supportive relationship could make all the difference.  The economic outlook may remain uncertain, but the determination of UK businesses to find a way forward is not.  And we are proud of the support that we provide to help these businesses grow.

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