As 2018 draws to a close, few small business owners are likely to mourn its passing. The turmoil surrounding Brexit is a fitting epitaph for a difficult year. With the uncertainty set to continue, businesses will need a firm grip on their finances going into 2019 and alternative finance will have an important role to play in helping them achieve this stability.

That the country’s small business sector continues to show vitality and growth is testament to the fortitude, resilience and expertise of these businesses. Because there have been plenty of challenges to meet in 2018.

Late payment practice continues to weigh heavy on small businesses

The issue of late payment has made the headlines again in December and the BEIS report is a stark reminder of another year in which the powers that be have failed to find a solution to this problem. Not even the collapse of Carillion and the scandalous late payment practices that were subsequently revealed could spur lawmakers into action to protect small businesses.

However, the business subject that perhaps dominated the headlines the most during the year was GDPR and the need for compliance with the legislation. Of course, this compliance came with a price tag. The immediacy surrounding the subject was closely tied in with the increased focus on cybersecurity and the prevalence of cybersecurity. It seemed like a major hacking scandal broke almost every month and it is unlikely that the huge data breach at Marriott International will be the last.

As a result, small businesses were under pressure to upgrade cybersecurity systems and ensure that company and client data were properly protected. As the year ends, in some areas of business, high-level security has become a must for trading with large clients. Naturally, beefing up cybersecurity means spending on new hardware and software for many.

Cybersecurity, staff training and payment tech all demand investment from SMEs

Small businesses have also been expected to give staff additional training on cybersecurity. This focus has come as part of a wider trend for more investment in employee training. Talk of a skills gap has grown louder over the year, at the same time as the government has indicated that the national minimum wage will rise again and has kept apprenticeship schemes on the small business agenda, and as small business owners have had to manage upward pressure on pay.

The environmental responsibilities of businesses have also made the headlines, most notably in the form of plastic use and the need to reduce it. Pressure continues to grow on businesses to cut down on where and how they use plastic, and to increase recycling and environmentally friendly practices. Taking such steps is to be applauded but the costs can be significant and difficult to manage at a time when margins are being squeezed until they are wafer thin.

The last 12 months have also witnessed the continued advancement of payment technology and the rise of cryptocurrencies and blockchain technology. These developments are undoubtedly exciting but adapting businesses to take advantage of them requires investment. At the other end of the scale, an issue that remains unchanged is business rates. The confusion surrounding the reform of business rates has been an unnecessary thorn in the side of many small businesses.

Small business sector remains healthy despite headwinds

However, despite all the headwinds and the uncertainty, small businesses continued to forge ahead and grow. Alternative finance helped them to do so.

In the wake of another year of caution from traditional lenders with regard to small business lending, the likes of invoice finance, asset finance, peer-to-peer lending and crowdfunding have provided small business owners with an alternative means of accessing capital for vital investment, such as in GDPR compliance, cybersecurity, new payment technology, new environmental policies and staff recruitment and training. These services have also helped them manage the costs of late payment and business rates reform, and their impact on cash flow.

This is how a Sussex small business used peer-to-peer lending, through a commercial finance broker that specialises in alternative finance, to raise the capital to expand its capabilities.

Making use of all SME funding options will be critical in 2019

Looking ahead, there are few signs that market conditions will get any less challenging in the short term, with these pressures remaining on small businesses. As such, it will be more important than ever that small business owners are aware of all the funding options available to them, including invoice finance, asset finance, peer-to-peer lending and crowdfunding. This is why 2019 will be another big year for alternative finance.

Want to know more about what A&T Business Associates can do for your business? Contact Jon Rook-Allden on 01903 602211 or jra@atbusinessassociates.co.uk.