Apprenticeships can be a double-edged sword for small businesses. They offer solid benefits but they come at a cost. Alternative finance can help SMEs get the most from the schemes.

Apprenticeships have clear advantages for small businesses. According to a new report by the Association of Accounting Technicians, of the smaller businesses in England that have taken on apprentices, over 90% reported that the apprentices had boosted productivity. Furthermore, in other news from National Apprenticeship Week, apprentices were credited with bringing fresh approaches and new ideas, reinvigorating stagnant projects, bringing different perspectives and bringing key tech skills.

It is undoubtedly the case that apprentices, if taken on, can add value to small businesses. However, there is a major stumbling block to the recruitment of more apprentices and that is cost. Just as the benefits of apprentices was a common theme of discussion during National Apprenticeship Week, so was the cost and the request for more funding from central government.

Introducing an apprentice into a small business comes with the obligation of providing training, which can total as much as 400 hours. For small businesses, which are already laden with a range of other policy and non-policy costs, this extra burden is hard to shoulder. Indeed, one of these policy costs relates to the Apprenticeship Levy, a tax that employers with an annual wage bill of more than £3 million must pay. In short, for small businesses owners, apprenticeship schemes cost a significant amount of money.

So, how can small business reap the benefits of apprenticeship schemes, and increase the number of apprentices they recruit, without pushing margins to breaking point? Alternative finance has a key role to play.

To fund apprenticeship schemes and the training and other related costs requires investment. While the government pledged more funding in the Spring Statement, there is still the need for more capital for extra resources (personnel and equipment) and to safeguard cashflow. As traditional lenders remain cautious with regard to SME lending and awareness of non-bank finance grows, the likes of invoice finance, peer-to-peer lending and crowdfunding are playing an increasingly significant part in helping small businesses access finance for these purposes.

This is how a small business in West Sussex used peer-to-peer lending, through a commercial finance broker that specialises in alternative finance, to raise the capital for new equipment.

Whether used as stand-alone services or integrated into a wide-ranging financial strategy, alternative finance facilities are providing small business owners the affordability, accessibility and flexibility they need to manage the financial demands of the various policy and non-policy-related costs, such as apprenticeships.

This is a critical time for SMEs and the advantages of apprenticeship schemes and employees that can add real value are arguably more important than ever. But for businesses to benefit fully cost-related barriers must be overcome. Alternative finance has a key role to play in achieving this goal.

To find out more about A&T Business Associates services, contact Tony on 01903 602211 or tony@atbusinessassociates.co.uk.