Chancellor Rachel Reeves’ recent Spring Statement delivered a stark forecast for the UK economy, citing the continuing uncertainty and a ‘world that is changing before our eyes.’ Indeed, as part of the announcement the Chancellor admitted that the independent Budget of Responsibility (OBR) had revised down its forecast for growth in the UK for 2025, from 2% to just 1%.
This will undoubtedly cause concern for businesses of all sizes, in all sectors as they look to plot their path forward.
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However, despite the uncertainties and myriad challenges, firms must continue to find ways to innovate, and to prioritise, and seek solutions that allow them to achieve growth.
Cash flow challenges
In a slow, stagnant economy, cash flow management takes on extra significance for businesses pursuing growth, organic or inorganic. Revenues, particularly in this environment, often lag operational expenses, payroll, and overheads, straining operations and causing challenges to the growth philosophy.
Pursuing growth in a low-growth economy brings with it several challenges, including those around cash flow. Increased competition and tighter margins drive businesses to cut prices and costs, which may harm long-term growth. Longer payment terms and customer delays exacerbate the situation. This cycle is one that businesses must strive to avoid. To do so, they must prioritise cost management, operational efficiencies, and strong customer relationships to stay sustainable and protect profits.
The benefits of pursuing growth during a challenging economic environment are manifold. Firstly, it offers the benefit of increased market share, and as a result, improved profit margins. Internally, it also encourages higher employee engagement – with staff, and key stakeholders actively part of the push for managed growth, potentially contrasting the approach against industry peers who may be more reluctant to proactively seek market expansion during the challenging business climate.
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By GlobalDataMany forward-thinking enterprises are exploring alternative financing options to stabilise financial structures and provide the agility to capitalise on growth opportunities when they arise. These agile companies are pursuing growth by optimising cash flow efficiency and increasing their access to credit by turning to independent funders for fast, flexible financing, including trade financing and invoice financing.
Flexible financing
Businesses looking for conventional finance solutions can be hamstrung by slower sales, rising operational costs, and underperforming business metrics, which are all potential outcomes in a low-growth economy. As traditional lenders become less tolerant of risk in this challenging environment, leading independent lenders are filling the credit gap with specialised funding solutions.
Trade financing and invoice financing are commonly used options, providing businesses with quicker, more flexible access to capital. However, these financing options serve different purposes and have distinct advantages. The choice between these two depends on the specific requirements of the business, its risk profile, and the type of transaction in which it is engaging.
At its most basic, trade financing is a group of financial products and services to help businesses manage international trade risks and capital requirements. It can be particularly useful for managing large, high-value transactions and the longer payment cycles associated with cross-border trade. While this option offers a range of benefits, such as risk mitigation, drawbacks can impact the cost, complexity, and flexibility of business financing.
In comparison, invoice financing provides a simple, straightforward path to reliable cash flow. It is particularly useful for businesses dealing with domestic trade that have short-term liquidity issues as it typically provides faster access to funds, requires less collateral, and can be accessed by businesses of all sizes.
Invoice financing enables businesses to build a revolving line of credit, allowing quick access to cash while waiting for customers to pay their invoices. With minimal loan and facility covenants governing the credit line, companies are free to deploy funds as needed without lender oversight.
Agility is key
With Andrew Bailey, Governor of the Bank of England, highlighting earlier this year that ‘we live in an in an uncertain world, and the road ahead will have bumps in it’ it is clear that organisations will have much to contend with over the short, medium and, potentially, long term.
Research from the British Chambers of Commerce in January 2025 supports this thinking, with the study highlighting that half of UK businesses intend to raise prices, citing hikes in business taxes, wage commitments and broader economic challenges as key concerns and reasons to justify increases in their prices.
For those companies keen to seek new opportunities in the challenging environment, agility is key. Trade financing can be preferable in situations involving larger transactions or international trade. However, managing this group of financial tools can be complex and time-consuming. Invoice financing, by contrast, is a simpler, more streamlined solution for managing cash flow issues. This flexible financing option provides fast access to capital with minimal loan covenants, empowering companies to utilise funds in any manner that best serves the interests of the business.
Businesses that can quickly adapt to market shifts, rapidly respond to customer needs, and optimise operational efficiency will undoubtedly be better positioned to maintain profitability, sustain growth, and stay ahead of competitors who may be slower to adapt.
Mark Finn is Regional Managing Director at eCapital Commercial Finance
