finance

Cash is King

I’ve spent some time over the last week working on business plans for 2 businesses. One is a new start up, in the middle stages of planning, and the other is an established business which is going through a major restructure which will allow them to survive after a tough few months.

One thing became apparent to me as I was working on their plans: Whether you’re in the very early stages of planning a new business, in the first few months of trading, or have been in business for a number of years, the changes in the banks lending policies over the last months/years have made one thing very clear.  Cash is King.  Your business, and mine, cannot survive without it, so while you probably know all these things, I thought I’d remind you, and myself:

  • Don’t buy more than you immediately need (of anything).  It may cost you slightly more in the long run but it keeps cash in your account today.

Secure Funding Through Business Angels

If you are looking for funding for your business and you have exhausted the 3 F’s – friends, family and fools; and you no longer have a line of credit with your bank, nor other sources of funding, then business angels may be your next port of call.

Typically business angels are high net worth individuals or companies with funding behind them that are interested in investing money into companies where they will receive a handsome return for the money they have put in.

The amounts involved range from £25,000 to £750,000 for which you give away a stake in your business in the form of shares. Usually business angels will also want to be personally involved with the business or may appoint a non-executive director to oversee their investment and help with the company’s performance to plan. In addition, they are looking for high returns – in the region of 20-30 percent per annum over the lifetime of the investment which in most cases will be 3-5 years.

With Banks not lending what alternative sources of funding are there?

This is the question that many SME’s are asking in ever increasing numbers. If the Banks will not lend to them who will? The answer is that there are many alternative sources of funding that many people are totally unaware of. There are even some products from main stream lenders that seem to be forgotten. Here are just a few examples, but remember these are ‘alternative’ sources and as such are more expensive than High Street lenders.

Why do so many British Companies ignore R & D Tax Credits?

The Government wants to give money back to British Companies that undertake research and development. Unfortunately many Managing Directors and Finance Directors and even their Accountants concentrate on the word ‘research’ and not on the word ‘development’ and so believe that this means that they will not qualify. In many cases this will not be true and so they are missing out on this very useful source of funding. If you are developing a new product or service, or making improvements to existing products and services you may very likely be eligible. Even software companies have been successful.

The scheme is designed to encourage and reward innovation. It allows innovative companies to either recover Corporation Tax paid and or receive a rebate of the NIC/PAYE generated by the business. Most first time claimants are able to also submit a claim for the last two completed year ends.
The average claim in the first year is £40k

The big 5 scary things

The Big 5 Scary Things Being self-employed has its pitfalls and in my two years of being self-employed I think I may have fallen into most of them. When talking to people who are considering leaving employment to work for themselves, these same 5 worries crop up in conversation. It seems these are the Big 5, the things that scare people the most and put them off being self-employed. Here are my experiences with the list of Scary Things…

1. Getting behind on the mortgage – at one stage I owed 4 months’ worth and it was getting to the really scary letter stage…I ignored the letters first. My philosophy was that if I rang them and told them that I still didn’t have the money it would push me over the edge completely. Stupid, eh? Anyhow, in the end I called, got it converted to interest only, made some horrible payments and am now paying off arrears monthly. I still have a roof over my head.

2. The Bank – I put my banking manager’s direct dial in my phone and always answered or called him back ASAP. I had a 2 month period where the company had NOTHING going through the account…so I spoke to the Man at the Bank and told him what steps I had put in place to cut costs, what I planned to do to sort out getting more money into the company and agreed to call back in 4 weeks. Guess what? I got in more money than I’d promised and called him within 2 weeks to tell him. They’ve gone quiet again. Quiet is good in the world of the banks.

3. Loneliness – being self-employed is the loneliest thing in the world at times. My advice is join a networking group such as www.4networking.biz. There you will find likeminded people (nutters) like yourselves who dreamed of being released of the shackles of employment and making it on their own. There you will find great new collaborative suppliers, customers, advice for free, go to motivational meetings that start your day off with a bang (and bangers…poor joke I know…sorry) and probably get a brand new shiny set of mates who get what you’re going through. Go join now.

How Important is the EIS Scheme in Raising Investment from Angels

My blog in April of this year entitled ‘Are Angels Alive and well in the UK’ resulted in me being asked questions about the EIS Scheme and how important that was.
The answer is simple, it is very important indeed.
Angels want to minimise risk as much as possible and the EIS Scheme provides them with a way to achieve this and an incentive to invest.
The EIS Scheme provides 5 ways of reducing risk:
30% Initial Income Tax Relief: If the qualifying investment is held for at least 3 years from date of issue, to a maximum of £500,000 per tax year. The relief is usually passed to the investor in the form of a tax rebate or by an adjustment in PAYE code. Actual cost of the investment is therefore only 70p in the £
No Capital Gains Tax is payable on disposal of the shares after 3 years as long as the initial EIS income tax relief was given and not withdrawn.