There’s no doubt that small businesses, in particular, have paid a heavy toll in the wake of the coronavirus pandemic, with many ventures teetering on the edge amid rising tax and rent arrears.
Make no mistake; a growing number of SMEs are running out of resources as 2021 gets underway, while the prospect of an extended third lockdown is continuing to bite entrepreneurs hard.
But could fintechs and financial innovation prove to be the savior of UK SMEs during these difficult times? Let’s find out!
How British SMEs Have Exhausted Their Savings
The challenges facing UK firms are reflected in wider society, with approximately half of UK adults reportedly suffering from mental health issues in the wake of Covid-19 (a further one-in-four of these individuals are also in debt).
According to the UK’s Financial Conduct Authority (FCA), fiscal resilience is also at an all-time low nationwide, with 12 million households struggling to cope with the monetary issues caused as a result of the pandemic.
This has bled into reduced consumer confidence and spending, and despite a significant boom in eCommerce sales (primarily for larger brands), SMEs and physical retailers have gradually seen their revenues fall.
From a commercial perspective, Nucleus Commercial Finance has revealed that almost 25% of SMEs have little or no savings in the current climate, while many faces mounting rent debts and the prospect of paying their annual tax contribution on January 31st as usual.
So, even though Nucleus themselves have sought to tackle this issue by pledging to lend £200 million to SMEs through the government-backed Coronavirus Business Interruption Loan Scheme (CBILS), there’s no doubt that smaller firms are on their knees and facing a perfect storm of challenges in the near-term.
Will Fintech Ride to the Rescue?
In many ways, financial technology or fintech has already had a huge impact on SMEs across the globe, particularly from the perspective of improving efficiency levels and reducing the paper and energy consumption of brands on a mass scale.
The reduction of carbon-intensive transaction processes (which has seen the eradication of paper usage in many instances), has also translated into huge cost savings for SMEs, which may make all the difference in a strained economic climate.
As Fintech has been pushed headlong into the consumer and commercial mainstream since the outbreak of the pandemic, it has also become increasingly influential in terms of how it can help small businesses during their time of need.
In addition to saving money, fintech innovation can reduce the time taken to complete essential administration and processing tasks. This has the added benefit of improving operational efficiency and optimising the productivity of employees, translating into superior profitability over time.
It can also be argued that fintech improves visibility and transparency for small firms, making it far easier to manage elements such as payroll and create a sense of accountability amongst staff members.
This undoubtedly represents the long-term future for SMEs in the UK, but it may also prove to be a saving grace during the most challenging of socio-economic climates.
