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This is how SMEs can afford to improve their digital capabilities

Businesses are being told that improving their digital skills and embracing greater automation in the workplace will make them more competitive, more productive and increase revenue. But this kind of growth requires significant investment. Alternative finance can help.

According the latest Lloyds Bank Business and Charity Index, a lack of digital capability is causing UK businesses to miss out on £85 billion each year. Interestingly, it showed that while SMEs are becoming more digital savvy, micro firms are being particularly slow to engage with advanced technologies such as cloud IT, online accounting software and digital training tools.

Separately, a new study from Centtrip shows that a third of medium-sized businesses believe that new technologies will generate significant savings, while almost three quarters already employing automation in areas of their business. The study goes on to say that larger firms are much better positioned to fully benefit from automation.

While automation is a contentious issue, with strong arguments on both sides, the advantages of sharper digital skills and the use of newer, smarter technologies are clear. However, this kind of development comes with a cost and for small businesses this is a significant barrier.

So, how can small business owners afford to improve their digital skills and explore the use of automation in the workplace, not to mention ensure that they have the proper cybersecurity security systems in place? Alternative finance can help.

The likes of invoice finance, asset finance, peer-to-peer lending and crowdfunding are providing small businesses with an alternative means of raising capital for essential investment, such as digital training and new equipment. This is how a small business in Sussex used peer-to-peer lending, through a commercial finance broker that specialises in alternative finance, to raise the capital to buy new equipment.

The strong growth of the alternative finance has been driven in part by prolonged caution from traditional lenders and a new report from TSB offers a good insight into small business attitudes. According to the research, just 49% of SMEs believe that their bank understand their needs, while over 40% think that the performance of their bank is holding their business back.

Interestingly, TSB says that banks should give small businesses better access to products and advice, which it believes could deliver a 10% rise in productivity and boost GDP by as much as £70 billion. It is certainly a big statement considering how banks have positioned themselves with regard to small business lending for the last decade. Could it be a signal of major change?

To this end, while a sea change in policy seems unlikely right now, it could be another indicator of mainstream lenders moving into alternative finance territory. Better and indeed smarter banking in today’s marketplace includes alternative finance and the big banks are increasing their engagement with traditionally non-bank finance facilities.

Regardless of what TSB’s report means for the SME finance landscape, it is clear that alternative finance is a central feature of this picture. And if small business owners are going to embrace the call to improve digital skills and invest in new technologies, they need to make use of all the funding options available to them, including alternative finance.

To find out more about A&T Business Associates services, contact Tony on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.

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