SME cashflow pressure sparks hike in working capital loans

SMEs are increasingly reviewing short-term funding options to manage clustered outgoings such as payroll, VAT and corporation tax, particularly as operating costs remain elevated, according to research by STAR Asset Finance.

The lender says it has seen increasing demand in working capital and tax-related funding options over the past year, particularly around key tax deadlines.

The rise comes as SMEs continue to face elevated operating costs, including wage bills and employer contributions, while also managing seasonal income patterns and multiple large outgoings landing at the same time.

“Cashflow pressures don’t always mean a business is struggling, often they’re simply the result of timing mismatches” , says Steve Swift, CEO of STAR Asset Finance.

“When major expenses like payroll and tax liabilities hit alongside rising costs, some businesses choose structured funding so they can keep working capital available for operations.”

“What we’re seeing is a shift towards more proactive planning,” adds Swift. “Rather than draining reserves in one go, businesses are looking for ways to spread large costs into predictable monthly payments, preserving liquidity while staying focused on growth.”

A recent example includes a long-standing hay and straw contractor securing a £250,000 short-term business loan to fund expansion into new markets. Structured around the client’s seasonal cashflow, the funding allowed the business to acquire equipment and launch a new product line while maintaining day-to-day operations.