A key component of growth for any SME is the right employees. And talented employees expect to be rewarded – a new Federation of Small Businesses (FSB) study shows small business pay rises at a three-year high. How can these firms afford it? Alternative finance is part of the solution.

According to the FSB, the percentage of small companies that have given staff pay rises is at its highest level for three and a half years. Two thirds of the small businesses that took part in the research increased employee salaries in Q1 2018. Furthermore, almost 80% of small firms reported that they have either maintained the size of their workforce or added to it.

The figures are encouraging and show that small businesses are willing to nurture and reward talent. However, recruiting and retaining this talent require investment, the price of which places yet more pressure on under-pressure margins.

In addition, small businesses must also manage new national living wage legislation. While the law in its pursuit of fairer pay is a positive development – a new report by the Resolution Foundation shows that the proportion of workers classified as being “low paid” is smaller than at any time since the early 1980s thanks to the initiative – it is still an extra cost for small businesses owners to bear. Indeed, recently, there have been high-level calls to extend the national living wage to under-25s.

So, how can SMEs afford to attract and keep talented employees who are integral to growth? Alternative finance has a part to play. The non-bank finance sector has become an established presence in the SME finance arena, with firms taking advantage of the affordability, accessibility and flexibility of services.

Businesses are using the likes of invoice finance, peer-to-peer lending and crowdfunding to raise capital to invest in new resources, such as staff, and safeguard cashflow. This is how a business in Sussex used peer-to-peer lending, through a commercial finance broker that specialises in alternative finance, to raise funds for new resources.

It seems clear that for small businesses to successfully bear the many policy and non-policy costs, including those relating to employee recruitment and retention, they must make use of all the finance options available to them, including alternative finance.

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