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How smaller firms can afford critical digital transformation

The adoption and integration of digital technology offers small businesses significant potential, but at the same time, it presents the sector with one of largest challenges, principally in relation to cost. How can firms afford to invest?

The year ahead has been tipped as a critical one for small businesses in terms of digital transformation and new technology, with its ability to ensure survival and drive forward momentum a significant factor at a time when unprecedented headwinds are pushing many firms to the brink.

A 2022 study from Sage shows that over 90% of businesses believe that technology is important to their survival and growth, with a similar number claiming it is key to their business resilience. Both will be critical in 2023 as businesses look to protect cashflow from attack on many fronts.

What is restricting small firm investment in new technology?

However, for all the benefits of digital technology, which covers a broad range of development, from the full realisation of e-commerce operability to the in-business use of digital tech to streamline and optimise workplace processes and systems, there is a major barrier to realising this potential: cost.

According to the same Sage research, cost is the most significant obstacle to investing in new technology, with over 40% of businesses expressing concern over the impact on cash flow and almost a third uncertain about the return on investment. A lack of awareness and staff training requirements were other leading barriers.

So while some sources are predicting an increase in digital technology spending in 2023, the general state of the economy and the general mood of the small business sector put a fairly sizeable question mark against such predictions.

Investing in digital tech and how alternative finance can help

Investment in new technology can undoubtedly drive sector and wider economic growth, but with such a squeeze on trading and spending power, many businesses may not feel confident enough to spend in such a way. This is where alternative finance can help.

In the wake of prolonged caution from traditional lenders, which is an issue that has returned during the pandemic and amid challenging post-COVID-19 market conditions, services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping small businesses survive and target recovery, stability and growth. Notably, alternative lending played a prominent role in the government’s headline emergency support schemes in 2022, including the Recovery Loan Scheme. This profile has helped cement the reputation of alternative finance in the business sector, with a recent study showing that more than 50% of small businesses are looking to use finance to achieve growth in 2023.

New tech funding and small business finance options

The year ahead is set to ask some serious questions of small businesses and their financial management, not least as support with energy bills is set to be slashed. Digital tech requirements are a critical part of the puzzle. For many firms survival depends on their ability to move with the market and invest. As such, it is vital that owners are aware of all the finance options available to them, including the services of alternative lenders.

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

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