According to research released by Cynergy Bank higher energy and finance costs are creating serious cashflow challenges. For example, only 53% of SMEs had cash buffers prior to July 2022 when energy prices began to soar.

The research also found that 2 in 5 (41%) had no contingency fund in place.

Most bosses were somewhat slow to protect their businesses from rising borrowing costs. Only 1 in 7 (15%) fixed their mortgage or rent in the early stages of the Bank of England’s hiking cycle.

Cynergy Bank launches Business Saver Account

The findings come as Cynergy Bank launches its new Business Saver Account with a variable 3.35% AER interest rate.

Sharon Maguire, Chief Product Officer at Cynergy Bank, said: “There has been a sea change in attitudes towards crisis planning. Cost pressures over the past year have led to businesses reassessing their risk profiles. In addition to cost savings, SMEs are urgently looking for solutions to help them build resilience in their businesses.

“Innovative finance solutions like our new Business Saver account can help businesses build up their rainy-day funds, whilst offering the flexibility to manage and access their money as they adapt to meet future challenges.”

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But while rising inflation and interest rates have eaten into financial firepower, they have also accelerated the pace of change and innovation within businesses.

Around three quarters of respondents (71%) said that the cost-of-living crisis had caused them to make significant changes to their business operations.

SMEs say they are now budgeting more smartly. Almost two fifths (37%) of those impacted by soaring overheads say they have shopped around on suppliers. A smaller number (31%) have switched materials. Some 13% resorted to using poorer quality goods and around 1 in 5 (22%) said they have rearranged working patterns to save on energy bills. Increasingly, the majority of businesses (60%) said that tech and innovation had played a “huge” part in their response to cost pressures, including circumventing traditional sales channels and innovating how their offering is sold.