Small business investment in cyber-security is back in the news as reports of AI-enhanced cyber-attacks grow. The need to strengthen cyber-protection is greater than ever but how can under-pressure firms afford to invest while safeguarding cash flow?

While the vulnerability of small businesses to cyber-attacks is hardly news, new info from Sky Business and TechRadar on a lack of preparedness among smaller firms and the next generation of cyber-threats underlines the urgency behind investment in stronger cyber-security.

How are small firms being targeted and what’s the cost?

Cyber-attacks pose a dual threat to small businesses, which are often an easier target as a result of weaker protection. Cyber-criminals are both directly attacking small businesses, using phishing schemes and malware to disrupt operations and extort money, and using small firms as means of infiltrating larger supply chains, where they are using the same means to wreak havoc.

The costs of such attacks can be highly damaging. According to the Sky Business research, firms that had been hit by a cyber-breach put the economic loss of an attack that took them offline at £123,984. Notably, Sky Business revealed that its service filters had blocked some 73 million malware, phishing and bot attacks over the last 12 months.

Are small firms prepared for the next-gen cyber-threat?

At the same time, new information from TechRadar pointed to how the cyber-risk landscape is evolving and how great a threat this poses to a small business sector that continues to underestimate the danger it faces.

Critically, while the use of AI is helping in the fight against cyber-security, it is also being used by cyber-criminals to make attacks more sophisticated and harder to combat. Next-gen threats include AI-enhanced phishing and AI-generated malware.

With regard to preparedness among small firms, according to a study from Sharp, the level of cyber-security training for small business employees remains inadequate despite a large percentage of these firms believing that a cyber-attack could be catastrophic, with over half fearful that they could go out of business as a result of one.

Investing in cyber-security and how alternative finance can help

Upgrading cyber-security comes at a cost and it is no surprise that small firms are finding it challenging to invest in raising awareness, educating staff and integrating stronger software and hardware, while protecting cash flow. This is where alternative finance can help.

While there was some improvement in the second half of 2024, coming into 2025 small business lending from traditional sources remains subdued, with 65% more SMEs experiencing difficulty in accessing finance from high-street banks. As a result, alternative lenders have become increasingly embedded in the small business finance landscape.

Services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses in the current funding climate. These alternative finance facilities, which offer a more easily accessible, affordable and personalised approach to lending, are helping small businesses survive and target recovery, stability and growth.

Notably, the Growth Guarantee Scheme is providing a wide range of finance facilities to smaller firms, including asset finance, invoice finance and asset-based lending. This is further proof that alternative lenders are increasing filling the small business funding gap.

Small firm finance options for funding cyber-security in 2025

The increasing incidence of AI-enhanced cyber-attacks is a critical warning for small businesses, not least as a significant number of firms remain under-protected against such threats. While funding investment remains challenging, the level of risk posed by cyber-attacks underlines the need to find a way to spend and protect cash flow.

This is why, as traditional banks remain cautious with regard to small-business finance, it is important that key decision-makers are aware of all the options available to them, including the services of alternative lenders.

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.