Despite the growing urgency around climate action, the small business sector is struggling to invest in net-zero development. Cost is the primary barrier for these firms, as they battle rising interest rates and high prices. How can they find the money for investment?

Climate targets are back in the headlines thanks to the findings of the latest annual report from the Climate Change Committee, which has heavily criticised the progress of the government’s plans to achieve net zero. Against this backdrop, a new study shows that small businesses are continuing to find it hard to accelerate decarbonisation planning.

According to the result of a new Bionic poll, around 79% of SMEs that do not have a green energy tariff believe that green energy agreements and renewable energy generation are beyond their reach. Notably, less than two thirds of companies surveyed have a green energy contract.

This research paints a similar picture to surveys carried out by NatWest and Lloyds earlier in the year. According to these studies, the prioritisation of climate action had fallen to its lowest level since 2020, despite awareness of net zero targets now at 95% of SMEs.

Net zero target spending and how alternative finance help

It comes as little surprise that small businesses are struggling to prioritise decarbonisation and to increase investment climate targets at a time when high energy prices, high inflation and a continued upward trend in interest rates is squeezing profit margins and putting cashflow under serious pressure.

However, it is critical that these firms find the resources to increase spending on net zero development – the sector has a key role to play in helping the country achieve its climate action goals. And this is where alternative finance can help.

Services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses in a funding climate characterised by prolonged caution from traditional lenders. Indeed, the issue has returned amid highly challenging post-Covid-19 market conditions, with bank loans to SMEs falling by £14 billion in the year to March 2023.

These alternative finance facilities, which offer a more easily accessible, affordable and personalised approach to lending, are helping small businesses survive and target recovery, stability and growth. Notably, alternative lending played a prominent role in the government’s headline emergency support schemes.

This profile has helped cement the reputation of alternative finance in the business sector, with a recent study showing that more than 50% of small businesses are looking to use finance to achieve growth in 2023.

Climate target investment and small firm finance options

Small business are in a difficult position. Fierce market headwinds are making firms more cautious and reducing their ability to invest, but at the same time, it is imperative that the sector does more to achieve net zero goals – it has to be a driving force. This is why it is vital that business owners 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 Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.