Innovation plays a crucial role in the development and performance of the small business sector, and in turn the national economy, a status which the government has recognised in its R&D Roadmap. However, cost is a major barrier to pursuing innovative activity in the post-Covid era.

What SME innovation looks like and why it is important

The coronavirus pandemic has highlighted the value of innovation, in all its forms. The importance of research and innovation in the medical and pharmaceutical sectors needs little underlining, but this kind of activity is critical on a much wider scale.

As the country and its industry base prepares to position itself in a post-Brexit world, in which the focus is increasingly on advanced rather than heavy manufacturing, the capacity to invest in innovation is essential, as is the ability of small businesses to play a key role in this activity.

Looking at innovation in a different way, in 2020, the ability of small businesses to adapt and innovate has been crucial to their survival and to the health of the economy. The enabling of customers to pay remotely, the implementation of online ordering functionality, the use of data analytics to drive business development and the digitalisation of customer communication and marketing are just a few examples of this innovative activity.

And this agility will continue to be essential in 2021 as firms work to ensure that they are well positioned to welcome in the post-Covid era and to grow and succeed.

What is stopping SMEs from investing in innovation?

If the importance of small business-led innovative activity is clear, then their ability to do so going forward is less so. According to research from GovGrant, while 86% of SMEs in the UK health sector believe that innovation is key to Covid-19 recovery, almost half say that it is too expensive.

The study also revealed that the main barrier to investing in innovation is cost, cited by 47% of SMEs in health-related sectors, followed by the lack of opportunity as the second most common obstacle to carrying out such work.

On a wider scale, a recent thought piece questions the impact of Covid-19 on innovation, suggesting that changes in workplace conditions, including in relation to emotional intelligence, team trust and remote working, could be affecting the capacity of individuals and companies to innovate and invest in innovative activity.

Financing innovation and how alternative lending can help

To invest in innovation and innovative activity, from a financial perspective, SMEs need to be aware of the all the funding options available to them, from government emergency support schemes to the services of alternative lenders.

With regard to the latter, in the wake of prolonged caution from traditional lenders and at a time of extraordinary economic contraction, 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 survive and grow.

Tellingly, alternative finance is playing a key role in the government’s Covid-19 business support strategy, in particular with regard to the Coronavirus Business Interruption Loan Scheme, which offers access to a range of finance facilities, including alternative finance services.

What business owners need to know about funding

It essential that small businesses from across the industry spectrum have the ability to innovate and undertake innovative activity. This investment is crucial to sector and economic recovery in the post-Covid era. As such, business owners need to have knowledge of all the funding facilities that they can access, including alternative finance.

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.