Are small businesses falling behind in the great AI race? Evidence is mounting that they are, with the burgeoning gap threatening performance and growth. What’s causing the go-slow and how can firms balance investment with safeguarding cash flow?

What is holding back small firm spending on AI?

While questions of safety and legality remain in relation to AI, it is transforming how businesses operate and how they are framing growth. It is increasing efficiency, enabling smarter decision-making, improving customer experiences and fostering innovation across the industry spectrum. However, reports are showing that a gap is emerging between small businesses and larger firms in terms of AI adoption and strategy.

One area in which this is most notable is AI training. There is a clear appetite to use AI, and use is growing rapidly in the workplace, but only a limited number of employees have received official training. According to research from Accenture, almost 80% of professionals use generative AI at least weekly at work, while less than a quarter have had proper instruction on how to use it. Given both the benefits and risks involved, training is critical.

A study from ZenRows paints a similar picture with regard to the use of AI to improve market knowledge. According to the research, while there is a clear willingness to use the technology, many small businesses are dragging their feet when it comes to adoption and are failing to take advantage of the technology.

At the same time, another study, from Shoosmiths, highlights another shortcoming in relation to AI that suggests small businesses are lagging behind. According to the research, less than 20% of firms have implemented a comprehensive AI strategy, despite significant use. While governance concerns are a clear factor, it is not much of a leap to argue that cost is likely to be a leading cause why many smaller businesses aren’t taking this step.

How alternative finance can help with small firm AI investment

Caution from small businesses with regard to AI investment is understandable, not least because of the costs involved. While the government has announced a raft of new AI policy reforms that are aimed at accelerating AI-related business investment, facilitating spending while protecting cash flow is highly challenging in the current climate.

This is where alternative finance can help.

Small business lending from traditional sources remains subdued as 2026 approaches, with almost 40% of firms finding accessing affordable finance one of their biggest challenges. Against this backdrop, 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 increasing investment in AI

Business growth and development rests of the use of technology, and right now most of all this means AI. If the AI adoption gap is not to grow any larger and if small firms not to miss out of the benefits, investment has to increase in 2026.

Access to finance is critical for making this happen. At present, with a nod to both the state of the market and small business lending, this is far from straightforward. This is why it is important that key decision-makers are aware of all the available finance options, 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.