84% of businesses plan to apply for funding in 2023 – we find out why

What will businesses use their funds for in 2023?

Of the SMEs looking to secure business funding in 2023, 15% of UK SMEs are planning to use their business finance this year to fund growth, 13% are looking to invest in new machinery or premises and 11% to get more inventory and stock for their business. Here are the top reasons for taking out finance by sector:

• Architecture, Engineering & Building - employee salaries (36%)

• Arts and culture - employee salaries (26%)

• Education - inventory and stock (21%)

• Finance - expansion (18%)

• Healthcare - inventory and stock (17%)

• Retail - expansion (25%)

• Travel and transport - reducing carbon footprint (18%)

Mounting cost pressures are impacting staff retention

This appetite for growth comes as welcome news amid a business landscape beset by mounting redundancies. 

Layoffs in the technology industry continue to hit the headlines, with Amazon, Spotify, IBM and Salesforce just a handful of the global brands who have already announced staff cutbacks this year.

Although Funding Options’ survey reveals that employee salaries are a key area of focus across multiple industries, the data also shows that the poor performance of the pound, energy price rises, interest rate hikes and a number of other cost pressures are creating heightened job insecurity across the board. 

Survey responses from over 1,000 UK businesses revealed that SMEs are contemplating making redundancies this year.

Almost three-quarters (72%) said it is ‘likely’ that their business will have to make staff redundant over the next six months, with just 27% reporting that redundancies over the first two quarters of 2023 are ‘not likely’. 

Digging deeper into the results, finance is unveiled as the hardest hit sector, with 88% of UK finance firms ‘likely’ to consider layoffs during H12023. 

A number of other sectors also ranked highly when questioned about the likelihood of staff redundancies, including the following:

• Manufacturing and utilities - 80%

• Sales, media and marketing - 73%

• Retail catering and leisure - 72%

• IT and telecoms - 69%

Why are SMEs struggling to retain staff?

Wide-ranging cost pressures are forcing UK SMEs to consider laying off staff in the short-term, and only 0.5% of survey respondents expect to experience no significant cost pressures over the next six months. 

Here are the eight biggest cost pressures business owners are facing:

• Performance of the pound/sterling

• Supplier price rises

• Interest rates

• Energy prices

• Import taxes

• Debt repayments, including government loan schemes

• Cost of labour, including increase in the National Living Wage and higher national insurance contributions

• Rent

Understandably, different sectors are experiencing the impact of certain cost-related challenges more than others. 

For instance, 33% of architecture, engineering and building firms say the rise in the cost of energy is their biggest cost pressure, with the same percentage (33%) selecting debt repayments as their number challenge.. 

For retail and leisure businesses, 36% selected the performance of the pound as the most significant cost pressure, followed by both supplier and energy prices (25%). The weak pound is making it more expensive for retailers to import goods from abroad, and even large retailers have paused growth plans due to energy costs. 

Funding for staff retention and growth

Despite the widespread anxiety around layoffs and cutbacks, businesses are doing everything they can to curb the impact. Of the businesses that took out additional funding in 2022, 35% did so for the purpose of hiring and retaining staff. 

It was almost as important as ‘investing in growth’, which 40% of SMEs used their business finance to invest in. It’s clear that although businesses are struggling to keep staff, they need to keep them in order to trade and grow with confidence. 

If you want to secure finance for your business over the next few months, whether it’s for staff retention or growth, you’re in the right place. 

Funding Options has access to a panel of over 120 business finance lenders, including those specialising in specific types of business funding. 

From short-term to long-term, secured loans to unsecured finance, you can explore a range of different funding types through us, including:

• Merchant cash advances – for companies that have been trading for 6+ months, and popular with retail, hospitality and ecommerce businesses

• Revolving credit facilities – can be used to fund stock, cash flow, hiring costs marketing and travel

• Long-term unsecured loan – term of 12-72 months, typically for businesses with a minimum turnover over £100k

• Short-term unsecured loan – term of 12 months or under, typically for businesses with a minimum turnover of £50k

• Invoice finance – for B2B companies who want to use outstanding invoices that are greater than £5k as security for funding

• Our application process is simple and designed to break down some of the barriers SME owners face when applying through more traditional lending routes.