Small Business Finance Markets Review 2023/24

Debt Advisory

Shaun Hyland, Debt Advisory Director at Leonard Curtis

The Small Business Finance Markets Review 2023/24 recently published by the British Business Bank prompted some interesting thoughts about current interest rates.

According to the report, the next decade is likely to feature higher interest rates compared with the previous ten years, where the Bank of England base rate remained below 1% for much of the time.  In response to inflationary pressures, The Bank of England started on a course of monetary tightening in Q2 2022 and recent yield curves suggest that financial markets expect the base rate to remain above 4% until at least 2026/27 despite inflationary pressures easing in late 2023.

The immediate impact of higher interest rates for small businesses will be an increase in the cost of current and future borrowing.  There are however secondary impacts that small businesses should consider and Leonard Curtis are able to provide assistance with many to mitigate the impact of higher interest rates.

In a comparatively high rate environment, we often see the need for finance shift from investment to liquidity.  Higher interest rates increase the hurdle rate to determine whether an investment is profitable and cash generative, often reducing the levels of investment.  Over a period of time, this lack of investment can result in a slow down in growth and deterioration in efficiency which can then contribute to a reduction in cash generation and liquidity.  

Interest rate rises will to some extent impact all businesses, large and small and many may look at ways to improve liquidity, often resulting slower supplier payments, placing greater pressure on any business offering credit to customers.

How can Leonard Curtis help businesses facing restricted liquidity?

Our team are well known and respected in the market and will be happy to discuss working capital  with any business seeking new or improved facilities from either their current lender or a new provider.  Something to be aware of in this scenario is that the refinance of facilities originally obtained in a low rate environment could see the cost of funds increase.

Extending the credit terms on payables can extend to liabilities due to HMRC.  We have an expert team of analysts within our funding team that successfully negotiated 100 Time-to-Pay agreements with HMRC during 2023 with a 100% application success rate.  Knowing who to approach and how to draft a proposal is critical to achieve a successful outcome.

Rather than seeking a new lender, businesses can often improve liquidity by maximising the efficiency of existing facilities, especially those using invoice finance for their working capital.  The Visibility team at Leonard Curtis use statistical analysis alongside decades of industry experience to ensure clients understand how to get the most out of their facilities and are always willing to help.

In summary, interest rates have created issues for many small business in the UK and the market does not foresee wholesale reductions in the immediate future.  If that is a worry for your or your clients, get in touch with your Leonard Curtis contact – they will be on hand to help.


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