Apprenticeships play an important role in the SME sector, in particular as labour costs remain a challenge. However, the use of apprentices remains underwhelming, with value proving a key barrier. How can firms overcome this obstacle and get in a position to invest?

What’s holding back SMEs despite recent government reform?

According to Damar Training, almost two thirds of SMEs interviewed for its new study are ready to take apprentices on board. This suggests a significant level of openness to making greater use of apprenticeship schemes, which have the potential to help fill key skills gaps in the workplace.

However, a number of factors are blocking such investment, including claims that schemes are ill-suited to smaller businesses, insufficient communication and support, and, most tellingly, cost. With regard to the latter, the Damar Training research showed that there is concern regarding true costs, hidden fees and how levy transfer works.

Notably, these findings come in the wake of a major shake-up of the structure and funding of apprenticeship schemes. Among the highlights, from October, SMEs that hire apprentices aged between 16 and 24 will receive a £2,000 hiring grant, while larger employers can transfer up to half of their unused apprenticeship levy funds to support SMEs. At the same time, SMEs can get a £1,000 grant for hiring apprentices aged 16 to 18.

While a number of apprenticeships have been defunded, notably those aimed at older staff, it is argued that the reform will help tackle specific skills shortages. For example, there are two new apprenticeships being launched in retail and hospitality, with a tailored scheme available for 16 and 24 year olds.

How alternative finance can help SMEs invest in apprentices

Whether the changes to the apprenticeship system move the needle as far as SME engagement and investment goes remains to be seen. The greater flexibility and tailoring to smaller business needs are positives, but cost remains a sizeable problem.

Investing the current climate is undeniable difficult, with little to suggest that the uncertainty undermining the market will come to an end soon and accessing finance from traditional lenders remaining challenging.

So, how can firms find a way to make the leap? This is where alternative finance can help.

In response to the squeeze on lending, alternative finance has become into a vital lifeline for small firms. Solutions such as invoice finance, asset finance and peer-to-peer lending are filling the funding gap, offering speed, affordability and tailored support.

Notably, the Growth Guarantee Scheme is providing a wide range of finance facilities to smaller firms, including invoice finance, and there has been recent calls for the initiative to be expanded significantly to help smaller businesses struggling to access finance. Such development offers further proof that alternative lenders are increasing filling the small business funding gap.

Small firm finance options for increasing spending on apprenticeships

It is hardly surprising that concerns over value and cost are stopping SMEs from committing to apprenticeship schemes, despite an openness to such a step and government reform. However, at a time when filling essential roles remains difficult, it is clear that strengthening engagement and increasing the use of this resource offers benefits.

Accessing finance is key to unlocking this potential. As such, with traditional lending routes providing limited opportunities, it is essential that key-decision makers are aware of all the finance options available to them. This includes 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.