Small businesses are integral to net zero ambitions and there is a clear commitment to the green energy transition. However, spending on development is underwhelming, putting targets at risk. What’s the cause and how can small firms make investment possible?

Net zero investment and how small firms are coping

Small firms represent a significant amount of the business sector and this makes their contribution to net zero goals critical. Achieving key targets will be very difficult without substantial investment from small businesses.

According to the latest UK Energy Survey, almost 50% of businesses reported that they are committed to achieving the increasingly ambitious target of net zero by 2030, an increase from just over a quarter of firms in 2024.

There are many ways firms can make their operations greener. Strategies range from improving supply chain sustainability, making deliveries greener, encouraging greener commuting and incorporating sustainability into KPIs to getting a smart meter, nurturing a sustainable company culture and using local renewable energy sources.

The greater use of electric vehicles is central to a number of strategies and this is reflected in government efforts to encourage larger take up among businesses. The Department for Transport has recently unveiled a £63 investment package to support the expansion of electric vehicle infrastructure, including grants for businesses to create new charging points at depots.

However, despite the desire from businesses and the government funding, small firms are proving hesitant to invest, primarily because of costs, in particular up-front costs. According to Geo Green Power, one third of SMEs feel unable to spend on the net zero transition because of the price of new systems and technologies.

Financing green energy transition and how alternative lenders can help

While the importance of investing in the green energy transition needs little reiteration, at the same time, it is hardly surprising that some small firms are finding it difficult to find the money to invest. The pressure on bottom lines has been severe and sustained.

So, how can small businesses invest in sustainable development while protecting cash flow? This is where alternative finance can help.

Small business lending from traditional sources remains subdued in Q3, with a third of small businesses struggling to access the finance they need in 2025. 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.

Small firm finance options for funding sustainability-led development

Amid cost increases, market volatility and reduced spending power, balancing the need to invest in key technologies and skills, such as those related to the green energy transition, with safeguarding cash flow is highly challenging for small businesses. But they must find a way. This is why it is important that key decision-makers 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 Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.