Investing in sustainability initiatives is far from straightforward for SMEs and recent policy u-turns are hardly helping to drive development in the right direction. Yet more and more firms are keen to commit to change – the big question is, how can they afford it?

Policy u-turns and the risk for SME green strategy planning

Unsurprisingly, following some major changes in policy with regard to net zero, small businesses are calling for greater clarity on sustainability-led development. For these firms, which are struggling in the face of serious market headwinds, the shift in positioning has been poorly timed to say the least.

While the cost of implementing green strategies has proved a stumbling block for many firms, the desire to adopt more sustainable practices has been growing in the sector. Notably, a feature of this development has been a growing call for more help from the government. The risk is that the policy u-turns may take some of the wind of out these sails.

Where small-firm sustainability investment is being focused

According to a new report on the small business perspective on sustainability and support from a new UK government, the percentage of UK small businesses they are working on sustainability initiatives for the year ahead stood at 92% in February 2024, compared to 58% in February 2022.

This is a significant acceleration in activity, with development focused in key areas, including reviewing energy usage of work premises, having a positive environmental impact on the immediate community, improving policies on packaging and waste and recycling, and switching to greener forms of transport.

Such development is a clear positive but in the wake of the policy u-turns, there is a danger that this momentum will be checked to some degree. A perceived lack of commitment from the top could well convince cash-strapped small firms to slow investment, despite the urgency surrounding such change.

Financing green initiatives and how alternative lenders can help

Only time will tell how SMEs react to the changes in top-level green policy. It is hardly surprising that many small businesses haven’t been able to roll out sustainable initiatives as quickly as they would have liked. Cost has been a major barrier.

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 the current funding climate (with 65% more SMEs experiencing difficulty in accessing finance from high-street banks). 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.

This profile has helped cement the reputation of alternative finance in the business sector. According to the British Business Bank, it is alternative lenders that are increasing filling the small business funding gap, with asset finance alone rising by 7% to £23.5 billion in 2023. At the same time, a 2024 study shows that more and more SMEs are turning to alternative lenders to access larger-scale finance packages.

Small firm finance options for green workplace initiatives

For small businesses desperate for economic growth and positive market development, the green policy u-turns have hardly set the right tone. However, investment in sustainable initiatives remains critical and, with traditional lenders retreating from small business lending, it is vital that companies are aware of all the finance options available, 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.