Small businesses are continuing to struggle with recruitment and the skills gap, in particular in key areas, with the cost of the problem put at billions of pounds by some. How can firms balance investing in staff with safeguarding cash flow?

Recruiting, retaining and training talent remains a critical issue for many small businesses, with the costs related to taking on new employees and staff skills development a barrier to investment and, ultimately growth. The continuing economic uncertainty is only fuelling this caution and, in some cases, causing firms to hold back on spending.

How much are SMEs investing in training and what is behind the trend?

Earlier in the year, according to a report from the British Chambers of Commerce, 20% of firms reported that they had reduced investment in their workforce, with a similar amount cutting spending on training. At the same time, the number of businesses planning to recruit fell to just over 50%.

Looking ahead, according to the new Skills Horizon Barometer, 90% of businesses are expecting some form of skills gap in the next 12 months, most notably at the entry level. There is also growing concern over skills gaps in key areas for small businesses, such as in relation to net-zero skills and cyber-threat skills.

With regard to the latter, according to a new survey from BT, almost 40% of SMEs do not have a formal cyber-training programme in place for their workforce. With the incidence of cyber-attacks on small businesses continuing to rise, with over 40% reporting one in last 12 months, the lack of investment in these skills is an increasingly serious risk. The average cost of an attack for small businesses is estimated at almost £8,000.

Closing the SME skills gap and how alternative finance can help

The need to invest to close the skills gap is clear, but many small businesses are freezing investment or even reducing the amount of money they spend on recruitment and training. Cost is the main barrier, linked to general economic and market uncertainty as well as employment legislation.

However, understandable as such caution is, it is not a sustainable strategy, with the lack of investment raising doubts over the capacity of businesses to grow. So, how can under-pressure firms afford to invest while protecting cash flow?

This is where alternative finance can help.

Small business lending from traditional sources remains subdued as Q3 gets under way, with SMEs still experiencing difficulty in accessing finance from high-street banks. As a result, alternative lenders are becoming 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.

SME finance options for investing in skilled staff and training

Small businesses are undoubtedly in a tough position when it comes to recruitment and staff training. The unrelenting pressure on profit margins makes investment in talent and skills increasingly challenging. Yet, without such expertise, growth becomes more and more difficult.

As such, firms have to find a way to access the funding they need. This is why, against a backdrop of continued traditional bank caution, key small business decision-makers need to be 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 Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.