There have always been two types of funding requirements that have historically been very difficult, if not impossible to find solutions for. The first was how do you raise finance against the value of signed contracts for products or services that are paid in monthly instalments, such as maintenance agreements, security agreements, subscription agreements, and most importantly Software as a service licence agreements. There is now a new type of finance that solves this problem. The companies that are applying for this type of funding must have a turnover of at least £300,000 and been trading for at least two years. They must have been trading with their client for at least 1 year OR they have sold the same type of service to different clients for at least 2 years. The downside is that their customer must have a turnover of at least £15m if based in the UK or £50m if based abroad. This type of finance will fund up front 80% of the client’s next 12 months worth of regular … [Read more...]
Using the right VAT number when invoicing EU customers?
Since the rules on charging and reporting VAT changed in 2010, HMRC has taken a lenient approach to errors in EC Sales Lists. But there are signs that it is now toughening its stance. When you send an invoice without VAT to a customer in another EU territory, you have to display the customer's EU VAT number and report the transaction on an EC Sales List. It is all too easy to obtain their VAT number, set up the customer account and use that number for all future invoices. If the VAT number is no longer valid, you should NOT zero-rate your sale of goods to that customer. HMRC are checking customer VAT numbers for the sale of goods to customers in other EU countries. It is looking at zero-rated cross-border sales and is raising VAT assessments if the numbers are no longer valid. It is also asking for evidence that goods have been sent out of the UK. So far it has only focused on goods, but we are expecting a similar change with regard to the supply of services. Regardless of whether … [Read more...]
A quick guide to Credit Control
'Credit control' is the system used by a business to make certain that it gives credit only to customers who are able to pay, and that customers pay on time. Credit control is part of the Financial Controls that are employed by businesses to ensure that once sales are made they are realised as cash or liquid resources. Crisis Credit control is usually an afterthought when an invoice has gone unpaid or a customer’s account exceeds a set credit limit. Follow your bad debt procedure: Gather your evidence, invoice, proof of delivery, contract terms. Send a Statement to your customer with a letter asking for the money (Letter 1) If you get no response in the time frame set out in the letter, send Letter 2, send by post and email attachment. Call the customer to check they received the letter. If they still do not pay you, then send Letter 3 detailing the Interest and costs they will incur if the debt is not settled. Two days later file the claim on the Government … [Read more...]
Financing the Retirement of the MD, or a Major Shareholder in a Family Business
Planning the retirement of the MD or another major shareholder in a family business is often an emotional, complex and time consuming affair. It is normally, but not always in the case of death, a long term project spanning a number of years. The challenges and risks are often more intense in a family business than in a non family one and these have already been discussed in previous blogs in this series. One challenge that has not been discussed is how does the family business plan for this important liquidity event, without seriously damaging the company’s cash flow and profitability? The MD or major shareholder will need to finance his or her retirement and the company needs to carry on trading with the possibility of a major capital withdrawal damaging prospects. The best solution for the business is for the incoming or promoted family member to purchase the shareholding plus potentially a portion of goodwill of the exiting member, with new capital from his/her own outside … [Read more...]
Personal Guarantee Insurance
Are you or your clients worried about the Personal Guarantees that you have given? Then think about PG Insurance. Personal Guarantees are the bane of most business owners’ lives and something that they continually ‘moan’ about. Invariably any form of borrowing above say £5-10,000 from a bank or other financial entity will require further security in the form of a personal guarantee from the business owners and directors. This is on top of any security that they may also take over the assets of your company. As has been seen over the recent past, it doesn’t take a lot for an excellent business to be hit by unforeseen factors that may result in adverse trading and the lender may demand repayment of its money. You may well be faced with a call on the guarantee that you have given. At that point your personal assets are at risk. Personal Guarantee Insurance is there to meet that claim up to the amount for which you are insured. Personal Guarantee Insurance … [Read more...]
What do the new accounting standards mean for you?
In the next year your accountant will start talking to you about the changes in accounting standards in FRS 102. This new standard is about moving the UK Accounting standards closer to the International Accounting Standards. The main difference will be an increase in costs and these will come in two parts. In the year that you convert to the new standards there will be extra costs because your previous year’s accounts will have to be converted to the new standards. There will then be higher costs because there are extra reporting requirements. Here are some of the new requirements: There will be new accruals for items such as Holiday pay. You will have to declare any foreign currency transactions you have set up but not actioned. You will need to make declarations about Fixed Assets, Intangible Assets such as intellectual property and Goodwill. What can you do to minimise these costs. Be prepared. Find out from your accountant which of these changes affect you … [Read more...]
Alternative funding for SMEs keeps on growing
As peer-to-peer lending, invoice trading and crowdfunding shift into the mainstream, the alternative finance market is set to double in size next year, with the sector set to reach a value of £4.4 billion The report from charity Nesta and the University of Cambridge said alternative finance to businesses and consumers was set to hit £1.74 billion in 2014, before jumping to £4.4 billion in 2015. The market was only around £666 million last year. A raft of finance providers have sprung up in the wake of the financial crisis when banks cut back on lending to SMEs, forcing them to look for alternative sources of finance. The co-author of the Nesta report, Liam Collins said: “These findings shed light on a growing movement that is revolutionising banking, investing and giving by using technology to simplify the links between those who want to invest money and those who need it. With bank lending to SMEs down again this quarter, it’s no wonder that alternative finance is fast … [Read more...]
Equity Crowdfunding Around the World goes from Strength to Strength
An Organisation called The Crowdfunding Centre takes data from 120,000 crowdfunds across the World The US leads the way in the number of crowdfunds, However, earlier this month, London originated 248 crowdfunds. The city in second place was Los Angeles with 158. London has a 33% success rate compared to 30% across the rest of the UK and around 25% globally. It leads the way in big growth industries like gaming and films, which has fuelled a lot of growth in the US, is increasingly finding a home in the UK. Evidence is also growing of the positive lasting effects of a crowdfunding round. These figures are from a recent report by Crowdfund Capital Partners: - Reward crowdfunders reported an average sales revenue rise of 25% - Equity crowdfunders reported an average sales revenue rise of 350% - An average of 2-3 new employees are taken on after crowdfunding - Just over half of firms that contributed to the report said crowdfunding was their first choice method for raising … [Read more...]
Funding Growth
Now that the economy is firmly on the mend, management teams have a new challenge to think about and that is how do they obtain the funding that they need for the growth that they are now experiencing. It is vital to remember that more companies go to the wall in a recovery than fail in a recession. Over trading is a very real danger. The best place always to go for funding is your own bank. You have a history with them and they should understand your business better than any other funder. Unfortunately over the last 6 months bank lending to businesses has fallen by a staggering £4 Billion. So if your business is growing and your bank is not lending, then who do you turn to? There are many independent sources of finance for growing companies. The independents are much more flexible in their terms and their attitudes and being smaller you are much more important to them. Invoice Discounting and Factoring is one of the easiest to obtain and most flexible ways of raising finance … [Read more...]
Help with R&D Claims – Should You Use Your Accountant or a Specialist?
Word is out that many more companies are eligible to claim R&D tax relief and credits than are currently claiming, which means hundreds of companies are missing out on this valuable source of additional cash. The cash value of money left unclaimed in Government coffers is astounding, running into billions of pounds since the scheme started in 2000. In this article I look at some of the reasons why companies are not claiming or under-claiming and the pros and cons of using your accountant versus a specialist to compile your R&D claim. Under claiming is largely the result of lack of knowledge about what constitutes R&D, not only within UK companies but also within the accountancy profession. This should come as no surprise as while accountants are specialists in dealing with company accounts and regular tax affairs, they are often the first to admit that they don’t understand or see the science or technology behind their clients’ … [Read more...]
Help with R&D Claims – Should You Use Your Accountant or a Specialist?
Word is out that many more companies are eligible to claim R&D tax relief and credits than are currently claiming, which means hundreds of companies are missing out on this valuable source of additional cash. The cash value of money left unclaimed in Government coffers is astounding, running into billions of pounds since the scheme started in 2000. In this article I look at some of the reasons why companies are not claiming or under-claiming and the pros and cons of using your accountant versus a specialist to compile your R&D claim. Under claiming is largely the result of lack of knowledge about what constitutes R&D, not only within UK companies but also within the accountancy profession. This should come as no surprise as while accountants are specialists in dealing with company accounts and regular tax affairs, they are often the first to admit that they don’t understand or see the science or technology behind their clients’ businesses. Yet many small business owners … [Read more...]
Latest SME Monitor from Aldermore
In the latest SME Monitor produced by Cebr for Aldermore Bank many positive indicators show that the economy is on the mend. Here are just a few of the indicators that the report highlights: • The UK economy expanded by 0.7% quarter on Quarter in Q4 2013. • Recovery is expected to gain further momentum over 2014 as a whole, as GDP is projected to rise by 3.3% year on year • Growth is coming from all three major industrial sectors, production, manufacturing, and services. • Annual cost inflation for small and medium-sized manufacturers fell back in Q4 2013 to 0.2% down from 0.7% in the previous two quarters • Borrowing costs continue to fall back for UK SMEs, with the median interest rate offered to medium-sized enterprises falling to 3.2% in November 2013. Rates have not been lower than this since June 2009. • The same goes for small enterprises where the median rate offered was 4.4% down from 4.8% • The confidence level for SMEs climbed to +39.7 this quarter, its highest … [Read more...]
RandD Tax Credits – Massive Boost for SMEs in UK Budget 2014
I was delighted to hear that the government has increased the rate of the Research and Development (R&D) Tax Credit for small and medium enterprises (SMEs) from 11% up to 14.5% for R&D costs incurred from next week (1st April 2014). The increase was announced in the UK Budget Statement 2014. This represents a very big increase, and means that up to 32.6% of what you spent on R&D can be claimed as a Tax Credit, which is a cash payment paid out in loss making situations. It now compares very favourably with the current 26% benefit (for spend after 1st April 2015) available when offsetting R&D enhancements against a profit. (The higher percentages are the result of applying an R&D enhancement value to the amount spent before calculating the rate of the tax relief or credit). It underlines the Government’s commitment to supporting businesses to invest in research and development and will help to ensure the UK is at the forefront of … [Read more...]
Can a recovery in the economy be dangerous for SMEs?
The answer is yes. Naturally we all welcome the emerging recovery we are experiencing in the UK but SMEs should look very carefully at their finances as they need to be very aware that the pattern established following previous recessions is that more businesses go bust as the economy recovers not less. Typically businesses slowly wind down during a recession until they eventually run out of cash. Economic growth is often the last straw for them. They need to fill new orders and recruit more staff to meet demand but just cannot get any more credit and administration beckons. They may also have been slow in paying VAT and PAYE and built up large arrears which now must be paid as during a recovery the tax man becomes more aggressive. Pegasus Funding Resources, a LGBA member company, can help SMEs that find themselves in this situation and in need of growth funds to take advantage of the recovery. Types of funding that are available in this situation include: • Trade Finance to … [Read more...]
Do I Qualify? Research and Development Tax Credits?
Can you recognise qualifying R&D in your Company? you may be surprised how many companies can’t don’t be one of them! What are R&D Tax Credits? The Government’s R&D Tax Credit Scheme was introduced for Small and Medium Enterprises in April 2000 and for large companies one year later (SMEs for R&D purposes are companies with under 500 employees and either less than 100 million Euros turnover or a balance sheet value of less than 86 million Euros). The R&D Tax Credit scheme applies to Limited Companies: R&D costs can be offset against UK Corporation Tax. If there are no profits a Cash Credit is available... ...all subject to qualifying conditions being met. Since April 2012 qualifying R&D costs can be enhanced by an additional 125%, and since April 2015 130% which means that: if profitable you can reduce your corporation tax by 26% of your R&D costs – e.g. by £2,600 for every £10,000 spent or if you … [Read more...]
Growth Vouchers – A New Scheme Offering Subsidised Advice to SMEs
This new scheme launched by the Government at the end of January is a £30 million fund that will enable qualifying small businesses to access expert business advice through an online Marketplace. Suitably qualified Business Advisors are registered on the Marketplace and you can choose one that is local to you, has the right expertise and has the experience. Growth Vouchers are worth up to £2000 but you will need to match fund this. You can of course spend more if required but the maximum provided by Government will be £2000. The funding is aimed at SMEs obtaining advice in five categories: managing cashflow, late payments, and negotiating finance; developing skills and taking on staff; improving leadership and management; marketing, attracting, and keeping customers; and making the most of digital technology. Vouchers can be obtained through a Government website and will be randomly issued to eligible companies. For further information and to see if you are eligible go … [Read more...]
Investment Planned by Smaller Manufacturers
The CBI's Latest SME Trends Survey shows that the UK’s smaller manufacturers are planning to boost investment in the coming year. The survey of 335 small and medium-sized manufacturers revealed that total orders and the volume of output increased in the three months to January. Domestic orders rose, while export orders fell. However, in the coming quarter domestic and export orders are both expected to grow more strongly and production is set to rise again. Stephen Gifford, CBI Director of Economics, said: "As the recovery takes hold, the investment cycle is starting to turn. It’s encouraging to see smaller manufacturers planning to boost investment, particularly in their plant, machinery and buildings. Orders and output continued to grow at a healthy pace, although not as fast as predicted. However, firms remain optimistic about prospects, with growth in orders and production expected to accelerate." Key findings – three months to January • 37% of firms reported an … [Read more...]
Owner Managed Business Survey Shows Business Confidence Improving for 2014
The Bank of Cyprus UK undertakes research 3 times a year to provide an on-going measure of the level of confidence within the Owner managed business sector in the UK. The research is based on a survey of decision makers all of whom are sole or part owners of businesses with 50 or fewer employees. This latest research was carried out in November 2013. The headlines of this research show that confidence has been growing throughout the year and were at its highest point at the end of the year. 46% of the respondents expect sales and revenue to grow in the next quarter, compared to 32% and 38% in the previous two surveys. Over the longer term the results are even more impressive with 56% expecting sales and revenue to grow in the next 12 months. This is up from 50% and 43% from the previous two surveys. This optimism is being reinforced by real success with 39% reporting new contracts and 12% entering new markets. They also believe that the chances of securing finance from the … [Read more...]
Debt Crowdfunding for Non Limited Businesses
Up until now debt Crowdfunding has only been available to Limited Companies and LLPs with at least 2 years accounts filed at Companies House. On the 21st October Funding Circle will be launching their new service for Non Limited Businesses. Pegasus Funding Resources, an LGBA member Company, is proud to announce that we are one of only 150 brokers who have been authorised to offer this new facility to clients. An application will require the same information as for limited companies plus bank statements and details of property ownership. This includes: Year to date financial information (management accounts) for the business as for limited company applications, no more than 3 months old including: Turnover Cost of sales Admin expenses Interest paid Tax paid Other (if applicable, please specify) Net profit 3 months of business bank statements Last 2 years of formal accounts Statement of personal assets or details of property ownership including … [Read more...]
Small Firms at Risk Due to Lack of Credit Checking
More than three quarters of UK SMEs have lost money as a result of a customer becoming insolvent, according to new findings published by information services company Experian. The firm surveyed 600 SMEs to understand the impact of customer insolvencies in the supply chain; it found that, in the last five years, 76% of SMEs have lost money as a result of customers failing. Nearly a fifth (19%) of these businesses each lost between £5,000 and £10,000, while 35% lost more than £10,000 over five years. When asked how often credit checks were carried out, 68% of SME owners said they checked their customers’ and suppliers’ credit ratings at least once a year; 24% admitted that they only credit checked new customers, and didn’t carry out ongoing checks; 38% had been running a business for over two years but had only just started carrying out regular checks; and 34% of business owners only started monitoring suppliers after they had already lost money. Ade Potts, managing director of … [Read more...]
