Small business spending on sustainability is back in the headlines with the release of new research. The message remains the same: commitment versus cost. So, how can firms afford to invest while safeguarding cash flow in a uncertain climate?

How does the SME sustainability investment landscape look?

A new study from the Small Business Institute (SBI) has underlined the critical state of small business investment in sustainability. According to the research, while more and more SMEs are seeing the benefits of improving their sustainability efforts, funding remains a key barrier to the development of net-zero strategies.

The SBI data shows that nearly half of SMEs have put more into sustainability development in the last year, while of those planning to expand plans going forward, a quarter will do so on a significant scale. However, at the same time, it reveals that cost remains a major obstacle to investment, along with a lack of time and support, and difficulty in understanding what sustainability development requires.

The findings are broadly encouraging but highlight the challenge that financing development involves, mirroring the results of similar studies carried out earlier in the year. According to research from the British Business Bank, NatWest and Better Bankside, sustainability action is a priority for less than a third of SMEs, while sustainability has notably dropped down the list of priorities for firms in recent years.

Similarly, research from Novuna shows that while over a third of manufacturing SMEs are carrying out sustainability-related activities on a daily basis, almost 80% cite operational and market pressures as a key challenge.

How alternative lenders can help with financing SME sustainability investment

The latest research on small business investment in sustainability shows a largely unchanged picture – prolonged market uncertainty coupled with continued caution from traditional lenders is making realising net-zero ambitions challenging.

Nevertheless, investment is critical, not least as sustainability action is increasingly becoming a necessity in supply chains, with larger companies demanding that strategies are in place and standards are met as terms of business. 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.

SME options for raising finance for sustainability-led investment

The necessity of sustainability-led investment is increasingly clear for SMEs, but while the appetite for net-zero-led evolution continues to grow, cost remains a major barrier to such development, which is putting future growth at risk.

Access to finance is critical to the successful implementation of plans. However, with traditional lenders steadfast in their caution, SMEs are finding this challenging. 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 Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.