Building a successful business can be a challenge when you are faced with the reality of an economic downturn. But knowing how to navigate through a tough market is necessary for the long term sustainability of your small or medium sized enterprise.

In this article, we’ll explore the concept of a tough economy, outline how it can impact a small or medium sized business and outline some of the financial facilities available for you and your business, including Business Loans, Asset Finance, Invoice Finance and Trade Finance. 

Identifying a Tough Economy

Tough economies can come in many forms and can be caused by a wide variety of different factors. In general, especially for a business, tough economic conditions will include a downturn in demand for products or services. This can be a result of a recessionary period, financial uncertainty and instability, or other economic activities that can affect one’s consumers, suppliers or even your business itself. 

Causes of Economic Downturns

Markets go through cycles and for every upturn there is likely to be a downturn. Inflation pressures, changes in demand and supply, geo-political shocks, or even disasters, natural, medical or otherwise, can all cause significant impacts on an economy.

Even perceived economic downturns can develop into real tough economies as consumer sentiment, investor expectations and the general public feel pessimistic about the marketing conditions themselves. 

Effects of a Tough Economy on Small or Medium-Sized Businesses

SMEs often bear the brunt of an economic downturn. This can come in the form of reduced cash flow as a result of less revenue coming in, increased debt to cover rising costs or to make up for the reduced cash flow, and limited access to additional capital when you need it.

For a business trying to grow, restricted or suboptimal cash flow can hinder efficient operations, ability to invest in growth and innovative opportunities and even weather the very financial storm that is causing these issues in the first place.

Business Financing Options for SMEs

Having a strong business and financial plan can help companies outlast the temporary but impactful economic downturn they are facing. 

However, in the event of tough market conditions, a business may need to explore various business financing options. Reliable access to working capital to help fill in the gaps in cash flow 

allows a business to gain long-term sustainability and ensure success.

At ScotPac, we tailor a variety of financial solutions to help businesses recover from economic times. Each of the business solutions brings with it unique benefits and features, however your unique situation and needs will likely require a unique solution.

Using Business Finance to Navigate Through Tough Economies

1. Business Loans

A traditional business loan is not just a way for new businesses to fund start-up costs. The lump sum of capital provided can help businesses invest in more inventory when working capital is tight, expand the business to widen the stream of revenues during downturns in demand, and invest in new equipment when needed to ensure ongoing, seamless operations.

A business loan provides stability for a business as it allows for flexible use of the funds provided. While there are varying eligibility criteria depending on the particular financial provider, for businesses who do qualify for a loan, the predictable monthly repayments provide an element of stability during otherwise unstable financial times.

2. Asset Finance

Asset Finance allows businesses to acquire the assets they need for their ongoing operations without having to incur a large upfront cost. The benefit during tough economic times in particular means that cash flow can be preserved without impacting on the business’s abilities to operate as usual.

Asset Finance allows a business to invest in itself and ensure that it maintains the capacity to service customers/clients, grow its market share and have the ability to be agile in the face of unexpected or sudden opportunities presented by the market.

3. Invoice Finance

Similar to a line-of-credit, Invoice Finance gives businesses the opportunity to continue trading successfully without having to wait for the prolonged term of payment from customers. In other words, there’s no delay in the provision of service and the receiving of cash flow. 

This improved access to reliable working capital unlocks the value of outstanding invoices and gives businesses the ability to navigate uncertain times without being at the mercy of customers’ punctuality. 

4. Trade Finance

Trade Finance is a solution available for businesses trading with overseas partners, i.e., importing and exporting. It facilitates new trade agreements to be made with trust and reliability through the assurance of payment and service provision by a third party financier.

During difficult financial times it can be important for a business to ensure its ability to maintain and create strong trade relations with suppliers or customers. Trade finance allows for businesses to do just that and over time recover or at least persevere through downturns in the economy. 

Partnering with ScotPac

ScotPac offers a comprehensive range of business and commercial finance solutions tailored to the unique needs of SMEs. Our specialists help clients find fast and flexible funding options to suit their specific needs and provide an element of financial stability during tough economic times. 

Thanks to our tech-enabled experiences for clients and our extensive experience with financial solutions, our clients enjoy long-term, customised financial solutions to ensure their individual success.

If you or your business is experiencing cash flow issues or are worried about access to working capital, especially during times of less than optimal economic conditions, make sure to reach out to the ScotPac office nearest you today. We’re here to help!