How to Finance Your SME’s Sustainability Ambitions During Troubling Times
Never before has there been more drivers for SMEs to invest in assets that switch to renewable forms of energy to reduce their carbon impact. But with inflation rising, supply chain issues, consumer and business confidence falling together with an SME community that is highly indebted (more than double since pre-pandemic), how can we persuade business principals to accelerate their sustainability journey?
Increased demand combined with supply challenges has led to an unprecedented increase in the cost of energy to SMEs, that do not benefit from the OFGEM domestic price cap.
The newly appointed Prime Minister announced last week that SMEs are to get a 6-month support package to reduce their energy bills. Business leaders are calling on the Government to urgently clarify what form this support will take with concerns that it is already too late to have an impact over the coming winter.
But with research from Cornwall Insight showing that although we will see a drop from the current highs we expect to see a stable energy price until 2030 that is circa 3 times higher than pre-2021; how effective is a temporary solution opposed to incentivising SMEs to invest in renewable energy and/or removing barriers to onshore wind and solar PV?
As ever it is going to be up to SME principals to lead the change required. The Future Leap Network is a fantastically driven group of companies that collaborate to use business as a force for good to address environmental and social issues.
We now have the opportunity to grow this network by giving SME principals, that may previously not have prioritised moral and ethical sustainable choices, with strong short-term financial drivers and mid to long term future-proofing of their business for investing in assets that will reduce their energy consumption.
But how will SMEs afford these assets when preservation of working capital to meet escalating costs and servicing record levels of debt is vital for survival? One of the solutions could be to take learnings from the tech sector and move to a servitisation model, where the “product” for sale is “Sustainability as a Service” opposed to the expensive asset itself.
This would require some evolutionary thinking in the green-tech supply chain and financial models that would support the investment needed to move to relationship based sales opposed to the current transactional model. Learnings are there to be taken from the technology sales channel on this business transformation.
Of course we have to consider that the useful life expectancy of many of the green-tech assets are significantly longer than their technology counterparts, so perhaps a hybrid approach is more appropriate? This could consist combining affordable monthly payment options via a form of borrowing that ensures ownership of the asset at the end of the agreement (so that Return on Investment (ROI) can be increased for as long as the business sweats the asset), together with advanced support options from the supply chain.
Future Leap Finance has been established to support suppliers of green-tech as well as organisations that are investing in their own carbon reduction journey. Ethical funding options give our customers the confidence that the network’s ethos of using business as a force for good is not compromised. Our consultative approach is transforming our partners business models and allowing them to grow their customer base with structured finance that works, without having to sacrifice equity or raise further debt.
If you supply green-tech or are exploring options on how you can afford to invest into your carbon reduction journey please reach out to us to have a complimentary consultation on how Future Leap Finance can support your organisation.
Written by Dan Proctor, Director of Future Leap Finance