Against the backdrop of COP26, the focus is growing on the role of small businesses in achieving net zero goals. However, cost is barrier to progress for these firms. So, how can they afford to go green?

Small businesses are a key contributor to the UK economy and this status means that they have a significant part to play in helping the country hit its decarbonisation targets. However, development in this area remains relatively modest – according to new research from NatWest, only six percent of small firms see climate action as a source of future growth.

One of the key factors shaping this outlook is the cost of sustainable development. While there is a clear desire to switch to renewable energy and improve energy efficiency, such as through greater use of electric vehicles, solar energy and sustainable products and packaging, such steps come with a notable price tag.

How small firms can take the initiative on decarbonisation

A new report by ACCA, Sage and the ICC acknowledges the difficulties faced by small businesses in terms of affording green development. A lack of expertise and resources are widely recognised as major obstacles to progress. The report calls for help for small businesses from policymakers and large companies.

Whether such assistance is forthcoming remains to be seen, and given the fragile nature of the economy, it is hard to be overly optimistic at present. However, small firms can take the initiative and there are a growing number of finance options available that can help them go greener, from traditional lender green funds to alternative finance services.

Going greener and how alternative finance can help

With regard to alternative finance, in the wake of prolonged caution from traditional lenders, which is an issue that has returned during the pandemic, services such as invoice finance, asset finance and peer-to-peer lending, are proving a vital source of capital for small businesses, both for maintaining cashflow and for essential investment.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping small businesses survive and target recovery and regrowth.

Furthermore, alternative lending is playing a prominent role in the government’s headline emergency support scheme, the Recovery Loan Scheme (open until the end of 2021). Invoice finance and asset finance between £1,000 and £10 million per business are available under the initiative. This profile is helping cement the reputation of alternative finance in the business sector.

Sustainable development and SME finance options

There is a lot of work to be done to strengthen the fight against climate change and achieve greater and faster decarbonisation, and small businesses are integral to achieving this goal. To be able to play their part and afford investment in greener development, it is important that these firms are aware of all the finance options available to them, including the services of alternative lenders.

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