August 2012

Reducing Business Debt: Recovery for Small Business Owners.

Increasingly small businesses are looking for funding to consolidate their debts, as owners feel the burden of the slowing economy, and greater financial expectations in coordination with a drop in consumer spending and a stagnant expansion of industries. Within the economic cauldron business are often not exempt from personal liability as stakeholders and senior partners regularly invest their personal wealth into the success of the business. It is unsurprising that the UK records of £154 million of personal debt increase every day and that a normal return of investment can no longer be guaranteed on key commercial projects.

Business debts are increasing but not all debt should be viewed with grave concern. A level of operational debt is in some cases highly necessary, to propel your business off the ground and to keep a business operational during changes to the economic landscape. Expansion is also another key area where a loan for the new office opening can yield untold benefits six months later when the business is able to increase its turnover and market clout with exciting new teams on board.

The critical point to adhere to with debt management is the control of the debt, allowing an acceptable operational level whilst avoiding the trap of financing interest payments only each month. Business debt and personal performance levels must also be separated and avoid the relationship between debt levels stress, which could in turn affect your decision making, reputation, and ability to keep key clients.

Here are some key issues and the recovery methods explained.

Business Debt Issues.

  • Excessive borrowing means potential cash flow issues.
  • No contingency fund available.
  • Stakeholder Confidence.
  • Inability to Invest.
  • Reduced Service Quality.

Recovery Methods.

Increase Income – This can achieved through a variety of ways that are bespoke to your business. Popular methods include cross selling to existing customers, offering special deals to undercut the market, and seeking referrals from industry contacts. Alternative sources of income are often underestimated and are not in the typical box of thinking but by using the advertising space on your website for Google AdSense and renting our additional office space you can significantly increase your incomings.

Reduce Costs – Two principal ways to do this are by looking at big savings and making reductions across the board. Targets 10% of savings for different departments and opt for cheaper across the board savings such as transport and purchasing equipment.

Restructure Liabilities – The amounts you owe to other people can be restructured to provide you with a disposable income and reduce the amount of debt to provide a working capital. Try replacing existing loans with lower interest loans, secured loans against the property and long repayments schemes to keep costs down.

Restructure Assets – If the business has any unnecessary assets such as used cars, surplus equipment and outstanding invoices, this should be pursued to look at raising capital.

Raising Capital – Acquiring new investors, venture capitalists and obtaining grants can be a great way to boost your business income and whilst this may not be possible in every circumstance, why not consider assessing your own assets list and whether it’s possible to convert them into business opportunities.

This article was contributed by – James Barnett, a writer on behalf of Cooper Matthews researching debt reduction strategies for small business owners.

What do Investors Want?

A recent report from London Business Angels shows just what equity investors are really looking for – a return on the money they have invested.

If you’re looking for equity investment, the investor’s requirements are equally important as your own. Yes you need money, and yes you may have a good idea that you think will change the way the world works but is that going to give the investor what he really wants?

The end-goal for an investor is simple and works in a similar way to the stock market. They bought equity (shares) in your business when the business was worth, say £5M. The aim for the investor is to sell the equity in your business at a future date when the company has increased in value. If the value of the business has doubled, so has the value of the money they originally invested.

If an investor backs your business and pours in their own money, it is an ‘investment’ for them – they are looking for a return on the money they have invested. Investors, like entrepreneurs, want to make money. In the case of equity investment, an investor can only make money when they sell their share of the business!

For this reason, investors look to back businesses that they feel are well placed to make money and grow in value.

So what will attract equity investors to your business? How do they pick out growth businesses? They will definitely want to see that you have a good product, there are significant barriers to entry for competition, a good market, a scalable business model, good business plan (with financials), a highly skilled team and often IP (Intellectual Property).

The Future of Payroll is RTI

HMRC are making changes with payroll in 2013, and if you have employees, it is important that you know what they are going to be. The main change will be that payroll is moving over to real time information – more commonly known as RTI. IRIS, the small business software specialist, has put together an interesting infographic about RTI and how it will affect business, entitled: Do you know how Real Time Information will change your payroll process?

All payroll tasks were carried out manually prior to the digital age, which included such tasks as calculating overtime, sickness, standard and holiday hours, and then often paying wages in cash or by cheque. The company would have to send all documents by post when HMRC needed information, and any problems had to be rectified by numerous phone calls or letters. Such a process was very time-consuming and inefficient.

Now that computer systems have become standard in most businesses, many of the tasks previously done manually have been computerised, and companies often use payroll software to automate their systems. Any information needed by the HMRC can simply be sent digitally. Whilst this has greatly improved payroll efficiency, there may still be delays when HMRC request information just once yearly. This can cause problems, especially for employees who receive certain types of benefits.

As HMRC is to begin using real time information, employers will have to provide PAYE information around the same time that they pay their staff, which has several benefits. Fewer errors will be made due to better accuracy in payments of the PAYE, meaning employees are less likely to underpay on TAX and fall into arrears. Any errors identified can be dealt with much more quickly, making life easier for the payroll department, and employees who claim work-related benefits will be paid correctly – reducing the risk of overpayment, which can cause problems for the employer and is also costly for taxpayers.

Some software companies, including IRIS, are RTI ready and have begun working with the HMRC to make sure that everything runs smoothly when the system changes over. Many finance departments are already testing their payroll software to make sure that it is future proof, which is a good idea in preparation for the changes taking place in 2013. HMRC will roll out RTI payroll from April that year, and all employers are expected to be using it by October 2013.

HMRC will be requiring employers to digitally advise them about deductions such as TAX and National Insurance as soon as they happen, and they will also need to report how many regular hours are worked each week. It will no longer be necessary to send separate p45 or p46 forms to them, as they will in future be incorporated within the new online submission process. Reporting will be carried out either through the new secure Government Gateway, or by an Electronic Data Interchange.

It is important that companies who have not yet checked their compatibility with the new RTI do so immediately, as well as considering the update of the payroll software system, to make sure that it is in accordance with HMRC’s new procedures.

Savers 'spurning banks'

The recent Banking scandals, including Libor fixing, combined with a lack of trust and low interest rates has resulted in savers turning their backs on the high street banks.

Funding Circle have conducted a survey where they have found that 7 out of 10 Britons would rather invest with a British business than put their money in a savings deposit account – where they earn a low rate of interest.

Furthermore, Funding Circle has claims it has seen an 89% surge in people joining their P2P lending platform since the Libor-fixing scandal hit in June.

However, the FSA has warned that investing through P2P lending websites is not generally regarded as a safe place for hard-earned cash. They warned investors that crowdfunding schemes, where businesses pitch their product or concept to attract start-up capital, are complex and can be high risk.

Not Claiming Expenses

A report released today is suggesting that a large number of business expenses are not being claimed by employees. Reasons for this vary but the most common reason seems to be losing receipts.

If you are a small business owner you should be actively encouraging your employees to make these expenses claims. By the same token, you should be making expenses claims on your tax return. The HMRC considers costs incurred for the purpose of generating business profits as legitimate business expenses so make sure you are claiming for the following if applicable:

  • Replacement and repair of fixtures, fittings and furniture
  • Utility bills
  • Fuel used by company cars
  • Offices supplies/stationary
  • Meals consumed during business hours for business purposes
  • Bills for phone and internet

Want to know more? Check out this excellent video.

If you are unsure about any claims then you can check them over with your employer, the tax authorities or a small business accountant.

Funds website aims to cash in as firm favourite

A young entrepreneur from Leeds is launching a new crowdfunding website to offer better returns to savers and help SMEs access the finance they desperately need.

The fund-raising has valued the pre-revenue company at more than £2.5m. The website,, is still in beta mode and will begin by supporting businesses in Yorkshire and then expand further afield.

The entrepreneur also believes that local lending has several potential benefits, e.g. lender who makes a loan to a local restaurant is more inclined to visit the restaurant, which will help to ensure its success.

Rebuilding Society allows lenders to make loans of between £10 and £2,000 – with the average interest rate earned reflects the level of risk. Businesses can then borrow a minimum of £2,000 and a maximum of £50,000.

HSBC ambitions to approve 80% of SME applications

The Commercial Banking arm of HSBC has published figures showing that they have provided £771m of gross new lending to SMEs based in the North East, during the first two quarters of 2012.

The published figures show that in the North East, 50,000 businesses have used HSBC’s lending facilities, and £6.3bn of new business loans was provided to SMEs across the whole of England.

The bank now says it is aiming to approve at least 80% of applications for finance from SMEs. 

HSBC is also launching a £4bn International SME Fund – supporting businesses that are involved with overseas trading, or have a desire to do so in the future.

Crowdfunding your business

High street Banks are continuing to drag their feet with regards to lending to SMEs whilst crowdfunding websites are moving forwards and matching up entrepreneurs with much needed capital.

In the UK, the rapid growth and increased awareness of crowdfunding has ultimately led to the FSA to warn that such platforms are only suitable for investors that are able to grasp the potential risks associated with P2P lending.

Bank to the Future is the one of the new players in this market – aiming to connect businesses with investors, however this platform allows businesses to raise different types of finance in one place, whether debt, equity, or donations from consumers.

The two most established players in the UK P2P lending market are Funding Circle and Crowdcube. Funding Circle has loaned £30m to 703 businesses to date with average gross yields of 8.3% on money loaned.

Why the banks are still strangling British business

Since the credit crunch, several banks have come within days of going under, and have been rescued by the British public – millions of pounds was injected by UK taxpayers to rescue the likes of Royal Bank of Scotland.

With this in mind, you’d think that the Banks would be grateful, however, the truth is that the past 5 years has seen a string of banking scandals.

Below are 5 reasons for businesses in the UK to doubt and distrust Banks:

  • Libor Manipulation – scandal on the 27th June 2012
  • Interest rate swaps – scandal on the 29th June 2012
  • Killing businesses – 4,115 companies in England and Wales went into compulsory liquidation or creditors’ voluntary liquidation. That’s an average of 45 businesses failing each day.
  • Lending Less – just £1 in £400 of bank loans goes to the firms that are the very backbone of British business.
  • Rising Rates and Fees – banks make fatter profits by borrowing cheaply and lending at far higher rates to credit-starved companies.

To summarize, banks owe their entire existence to the British public and UK businesses – it is about time they started treating us more fairly!

London 2012 success prompts £10m tourism funding boost

Culture Secretary Jeremy Hunt has announced that almost 10 million additional tourists are expected to visit the UK from overseas by the end of the decade under plans to capitalize on the success of the Olympic Games.

Hunt also announced record-breaking figures for visits to the UK and spending by tourists this year, on the back of which, the Culture Secretary announced another £10m funding for tourism campaigns in the UK and China – to ensure the interest in London and the UK generated by the Olympics continues.

The target is to increase the number of oversea visitors from just over 30 million per year to 40 million per year by 2020.

Of the £10m funding, £2m is allocated for the ‘Holiday at Home’ campaign – aimed at encouraging people to make more trips and holidays in the UK.

£8m would be targeted at the Chinese market – where the UK ranks low compared with other European countries as a holiday destination.