According to the Minutes from the October meeting of the Bank of England’s Monetary Policy Committee (MCP), UK unemployment and economic output are improving at a faster pace than expected. Continue reading
According to a recent report, non-bank lending to small businesses has hit a five-year high, with funding of £10.5bn of credit having been arranged in the past year, an annual rise of 17 per cent and the highest figure since 2008. Continue reading
A report published last week by the National Audit Office (NAO) confirmed that the rural superfast broadband roll-out programme is almost two years behind schedule, so will miss its May 2015 target.
In 2011 the Government pledged to provide internet speeds of 24 megabits a second to 90 per cent of the UK by May 2015, but has now promised 95 per cent coverage by 2017.
It made £530m available to county councils to fast-track the strategy, with the proviso that the money was matched by the local authority. However, the NAO has found that just nine out of 44 rural areas will have been upgraded by the deadline. In addition, even when the 95 per cent target is achieved, large areas of rural land will still be without the service.
This is worrying for farmers, as services are being increasingly moved online as part of the Digital by Default programme, and many are being asked to file VAT returns online and submit payroll information in real time to HM Revenue & Customs. In addition, the Rural Payments Agency, which administers the Single Payment Scheme (SPS), is moving towards online-only submissions of SPS claims.
According to the NAO, one reason for the delay was a longer-than-anticipated approval for the strategy from Brussels. Another was put down to a high number of negotiations around the country to allow the necessary work to go ahead.
The audit office’s report also raised concerns that BT was the only firm in a position to win contracts, being the only one left of the original 16 bidders, and Auditor General, Amyas Morse, said he would not be surprised if even the extended target date were to be missed, which would not be good for the farming community.
We are all aware that it’s more difficult to obtain funding from banks. Many SME’s continue to do battle with the current economic conditions without full bank support. Even strong businesses with good track records and assets to secure funding against find it difficult to obtain funding to invest in new products or their development.
This lack of liquidity in the SME sector is a real challenge. Despite central government intervention via schemes such as the funding for lending scheme banks are favouring traditional asset backed and working capital deals. The consequence, underfunded speculative research and development projects.
To assist businesses innovate, the government has introduced “innovation vouchers” and re-packaged “SMART grants” that provide small amounts of funding in certain areas. That however, leaves a real cash flow gap for those engaged in serious innovative developments.
Alternative lenders such as Funding Circle continue to fund projects and are becoming more popular but for larger investment requirements business owners should still consider investment from business angels and others with pots of spare cash benefiting only from low interest rates offered by banks on savings.
Unfortunately for most SME owner managers, outside angel investment is not well understood and is even less accessible. As we sometimes see on Dragons Den however, accessing angel investment and people with contacts, experience and knowledge can be the difference for many businesses.
It’s for that reason that Nicholsons have teamed up with Lincolnshire Investment Network to help business owners access local Lincolnshire angel investment. On 27 June we are holding a seminar which will help you become more investment ready and answer questions such as:-
- Where do I go to meet angel investors?
- What do they look for?
- How do I know whether my business is ready?
- How and what do I present to them?
- What will they want?
- How long will it take?
If you are a business looking to raise finance for a project you should not miss the opportunity to learn about how you can raise that finance from Lincolnshire based angel investors.
It doesn’t seem like we can go a week without hearing about how difficult it is for small and medium sized businesses to access finance. The banks issue statements saying that they are lending and are open for business and that there’s a lack of demand but I speak to lots of small and medium sized business owners who tell a different story.
Either they have been told by their “relationship” manager that they cannot support any new lending and therefore don’t apply or feel that because of previous conversations there is no point in approaching their bank.
It’s usually quite easy to see why the banks are unwilling to support. Maybe; whilst profits are growing they are still not performing as they were four to five years ago, there are no real tangible assets to provide as security and balance sheets are weak maybe due to losses incurred in recent years. More often than not there are usually also no up to date management accounts, no budgets to compare performance to or predict the future and generally a lack of business planning.
I believe it is the disconnect between business owner and funder that is the most important problem that we need to solve if we are to help small and medium sized businesses develop and ignite wider economic growth in the UK. I’m familiar with all of the bank lending schemes but don’t think that a one size fits all approach is what’s needed.
My opinion is that small and medium sized business owners need tailored advice that is based on an understanding of their business and their needs and with the knowledge of wider funding solutions available on the market.
Whilst some of the support a business will need will come from a high street bank there is now a wide range of alternative (peer-to-peer) funders that can offer flexible solutions, all of which can be combined into an overall funding package. This week I connected with a company called Platform Black who offer a flexible invoice finance product based on a peer-to-peer model. Funding Circle who offer peer-to-peer term loans report funding nearly £96 million via their army of investors whilst crowd cube provides more of an equity based solution.
There are solutions out there for small and medium sized business owners whether they are multi-generational businesses or run by give it a go entrepreneurs providing there is a solid idea, good commercial business plan, a passion and desire to succeed. So my advice would be connect with a professional who understands the alternative lending market and who can help find the right mix of funding products for your business and let’s get Britain going again!
Over the last couple of weeks I have spoken to three business owners who want to raise cash in order to grow their businesses.
Between them their growth plans would see them employ 10 more people and invest around £250,000 in new equipment.
After approaching their respective banks all were left feeling demoralised. This is unfortunately a common feeling as banks don’t seem to want to speculatively fund the growth of their customers. On more than one occasion clients have been told to come back in six to nine months when they can demonstrate their plan works and they are achieving their budgets.
Chicken and egg…
I get really frustrated when I hear this. I appreciate that banks are not equity funders but they should be funding working capital and considering situations where companies are in a growth phase.
Balance sheets of these businesses are weak, wearing the scars of a double dip recession and owners have more often than not sacrificed all of their own assets because thy are passionate about what they do and their business.
So on hearing the Chancellor announce this was a budget for growth my clients and I were waiting for how the Government we’re going to increase funding into the SME sector.
Unfortunately after listening for an hour I was left disappointed that there were no firm commitments to increase the amount of funding made available to SME’s.
We did hear more about growth vouchers, up to £5,000 of support for growing businesses to access support and professional advice however, I don’t as yet know much about them!
So where from here?
Well I’ll be sitting down with my clients reviewing their cash flows and identifying sources of funding suitable for their needs and concentrating heavily on the support peer to peer lenders can provide.
Working maths early in the morning is not something I do every day but I was determined to crack this little query! When you take out a new lease there is often stamp duty to pay. To work out the value of stamp duty due you can use a calculator on the HMRC website. It’s not that I don’t trust calculators but like our tax software I want to understand the numbers. I wanted to know how it worked. ; So it’s a simple Net Present Value calculation of the rental figures over the term of the lease plus any lease premium. An excel workbook later and I had the calculation but couldn’t find the discount value anywhere. It was suggested by a colleague that LIBOR+1% might work but which LIBOR rate? ; So I used the 3.5% rate on the HMRC example and this worked to the penny! Not a foolproof exercise but at least I understand the rationale behind it! They say tax doesn’t have to be taxing…