Small business are urgently in need of a digital health booster. New research has exposed notable shortfall in spending on digitalisation and how this gap in putting sales at risk. Looking ahead, how can firms manage investment while safeguarding cash flow?

What does small business digital ill-health look like?

A study from Zoho how revealed that while larger businesses are performing well with regard to digital transformation, and enjoying the benefits of this investment, small firms are dragging their heels in comparison, with only just over a quarter rated as having a good level of digital health.

Notably, the research highlighted that by failing to sufficiently invest in their digital health, small firms are missing out on positives related to such areas as new technology, platform stability, IT management and data sovereignty. Significantly, this includes benefits linked to investment in next-generation AI.

A separate study from Startups.co.uk highlights the gap in AI adoption. According to the survey, around 75% of SMEs have no formal AI governance policy, with almost a third stating that they do not intend to implement such a plan.

Cyber-protection is another area when a lack of small business investment is evident. Despite the growing risks relating to cyber-attacks, and the increasing amount of data detailing this vulnerability, spending on strengthening protection remains underwhelming.

How alternative lenders can help with financing SME digitalisation

There are a number of reasons why small businesses are lagging behind larger companies in terms of digital health, but one stands out in particular: cost. The means to get healthier are easily accessible, and awareness of the need to act has risen markedly, but the price tag attached to development is proving a major barrier.

Compounding the challenges related to cost is the ongoing caution being shown by traditional lenders towards small businesses. As such, accessing finance continues to be difficult. This is where alternative lenders can help.

Alternative lending solutions, such as invoice finance, asset finance and peer-to-peer lending, have become funding lifelines. For example, asset finance is being commonly used means for buying vehicles, machinery or equipment, while invoice finance is being employed to manage staff costs and, more broadly, to cover costs while income catches up.

Overall, by offering a more accessible, cost-effective and personalised approach to lending, these alternative finance facilities are helping small businesses navigate the current climate and target greater stability and growth.

Small business finance options for vital digital transformation

While it comes as little surprise that small businesses are struggling with their digital health, with investing in digitalisation proving highly challenging in the current climate, it is a step that they have to take, both in terms of optimising their own operations and remaining attractive to customers and as supply chain partners. Fail to do so and the risk of lost sales grows ever larger.

As such, against a backdrop of continued reticence from traditional lenders, it is essential that key decision-makers at small firms 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.