It has been another eventful, challenging year for small businesses. It some respects, the sector has witnessed significant change, in others, it has been more of the same. As the clock ticks down on 2024, it’s a good time to look at what kept pressure on small firm cash flow and what will be integral to improving access to finance in 2025.

Key 2024 developments areas and what has blocked progress

The political landscape finally became less tumultuous in 2024, but there was no immediate fillip for the economy, with conditions remaining sullen into the fourth quarter. This ongoing inertia and the resultant pressure on margins and investment capital has framed the year for small businesses.

Cyber security and the adoption of workplace digital tech, including AI, have been key themes in 2024 and while the benefits of investing in new and enhanced systems have been highlighted, small businesses spending has been lower than expected, with cost a major barrier.

The story around decarbonisation and sustainability workplace development has been similar, with small business-related headlines mostly centring on why investment isn’t happening faster. Notably, the putting back of national deadlines and discord around national targets have only added to uncertainty, with decision-makers already wary of investment costs.

An old foe, a new must and the same problem

Late payment has remained a headline subject for small businesses in 2024. As usual, there has been plenty of rhetoric, including promises to stamp out the problem. All eyes are on a new raft of reforms, but optimism remains tempered, with proof very much in the pudding.

In a related area, workplace wellness has featured increasingly throughout the year, with debate touching on the need for small businesses to do more safeguard the mental health of employees, from top to bottom. Despite the clear need for development, once again, small business investment has been checked to some extent by caution over capital.

Away from the price tag attached to cyber security, digital tech, late payment and workplace wellbeing, the burden of essential costs has remained significant for small businesses, despite largely dropping out of the headlines. Firms have continued to struggle with energy, fuel, material and labour costs, the level of which has remained high.

Small firm access to finance and the importance of alternative options

If market conditions have been one key factor behind small business caution over spending, another has been the stance of traditional lenders. While there has been some easing towards the end of the year, small business lending remains subdued, with 65% more SMEs experiencing difficulty in accessing finance from high-street banks.

As a result, alternative lenders have become increasingly embedded in the small business finance landscape. Services such as invoice finance, asset finance and peer-to-peer lending have again proven a vital source of capital for small businesses. These alternative finance facilities, which offer a more easily accessible, affordable and personalised approach to lending, have helped small businesses survive and target recovery, stability and growth.

Small firm options for accessing finance in 2025

Small businesses will enter 2025 with greater optimism than this time last year, keeping their fingers crossed that the nascent economic growth witnessed towards the end of the year will turn into a meaningful, longer-term upturn.

Regardless of what happens, and at what pace, investment in key areas will be required in 2025 and small businesses will need to access finance to survive, grow and hopefully thrive. As such, the role of alternative lenders looks set to continue to be integral to the health and wealth of the small business sector.

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