How SMEs can afford protection against key person absence
The prolonged absence of a key member of staff is a serious threat to small businesses yet more than 4.5 million of these firms do not have key person insurance in place. Cost is a barrier. How can small business afford the protection they need? Alternative finance can help.
The absence of a key employee can have a major impact on a small business, slowing down productivity, reducing revenue and affecting overall company performance. According to a new survey from Royal London, 1.6 million SMEs in the UK have witnessed key person absence, while 2.4 million agreed that they would be hit hard if they had to cope without a key member of staff.
Despite this experience and awareness, the research also revealed that some 4.6 million SMEs do not have a key person insurance protection policy, with some having no business protection plan in place at all.
There is a clear need for small business to increase investment in protection planning, in particular as a widening skills gap suggests that finding a temporary or permanent replacement for a key member of staff would be challenging. According to a study by Robert Half UK, small businesses are especially vulnerable to this skills gap, the growth which is being driven by Brexit, increased digitalisation and economic factors.
Buying a key person insurance policy is one way that small businesses can better protect themselves against the loss of a key staff member, but such a step comes with a significant price tag, and at a time when small businesses are struggling to deal with a raft of other policy and non-policy costs and the impact of these costs on cashflow, this is not easy to do.
Tellingly, according to a new study from Close Brothers, half of the SME owners that it questioned admitted to suffering sleepless night because of cashflow problems.
So how can small business owners afford the protection they need to safeguard against key person absence and get a more restful night’s sleep?
Alternative finance can help.
In the wake of prolonged caution from traditional lenders, a position that the protracted Brexit process is helping to entrench, alternative finance facilities such as invoice finance, asset finance, peer-to-peer lending and crowdfunding are proving a vital source of capital for small businesses, both for safeguarding cashflow and for essential investment. These facilities, which offer a more personalised approach to lending, are helping small businesses grow.
Key person absence is an issue that small businesses have to address and while many do, a significant number do not have sufficient protection in place. It is important that owners find the capital to safeguard their businesses and their potential. To do this, it is essential that they are awareness of all the funding options available to them, including alternative finance.
To find out more about A&T Business Associates services, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.
