HBOS and Lloyds TSB have both today unveiled separate new packages of measures to help small businesses.

The two banks, which are due to fall under partial state ownership when their merger is completed early in the new year, say that the measures are aimed at easing the financial pressures that firms are facing in tough economic times.

Under the HBOS package, through its Bank of Scotland Commercial arm, the company is to guarantee the pricing of overdrafts to small businesses for 12 months from the date of arrangement of new loans and renewals.

It is also to launch a small business helpline early in the new year providing help and advice to customers. A downloadable guide to “managing your cashflow” will be available to all small businesses from the start of next week.

It has secured £250 million of funding from the European Investment Bank to provide lending at discounted rates to its small and medium-sized customers during the economic downturn.

It follows a similar package of guarantees announced by Royal Bank of Scotland.

But the banks deny that political pressure has forced them to announce the measures.

Adrian Grace, managing director of Bank of Scotland Commercial, said: “Bank of Scotland has been supporting and funding small businesses for over 300 years.

“We understand the financial pressures that they are facing during these difficult economic times. That is precisely why we have launched this package of measures – to provide both financial assistance and, equally importantly, some reassurance that the bank is committed to supporting small business throughout the UK.”

Lloyds TSB has promised to pass on any future interest rate cuts in full over the rest of this year and next, while pledging to avoid increases in charges unless there is a material change to a customer’s business.

It also pledged to improve the advice on offer to customers with 120 “expert guidance” seminars planned for across the country.

John Maltby, managing director of Lloyds TSB Commercial, said its new charter was designed to “inject much-needed business confidence”.

Yet in a conflicting message, Lloyds chief executive Eric Daniels warned today that the Government’s bank bailout could deter bank lending.

He said that the cost of the preference shares that banks are issuing to the Government and the continued strain in wholesale banking markets has reduced appetite among banks for new lending.

“I don’t believe that banks are going to quickly restore lending and help the economy because of the funding and capital issues,” he said.

“Banks will try and repay the Government as quickly as possible. And one of the ways to free up capital is to stop lending.”

About the author: Paul Stanford http://www.paulstanford.co.uk/blog  has provided practical advice to hundreds of entrepreneurs for the past 5 years helping them to successfully start-up, transform and sell their businesses. Get in touch to see how his business http://www.4momentum.co.uk can help do the same for you. You have full permission to reprint this article provided this box is kept unchanged.

Copyright 2008 Paul Stanford

When is factoring not factoring? Know the difference and don’t pay the price for not knowing!

I had an interesting meeting with my friendly man from HSBC yesterday and one of the things discussed was factoring (invoice financing). I asked him what was the point in paying for factoring if the factoring company was going to come back to you for payment if your client refused to pay up after say 90 days!?!!? He explained that essentially there are two types of factoring – Recourse factoring and Non-Recourse factoring.

So what does all this mean? Well it might surprise you to learn that most factoring companies either offer one or the other – rarely both.

Recourse Factoring
With this method if the debtor (your client) does not pay the invoice, recourse factoring allows the factoring company to come back to the seller (you) for payment. The risk of insolvency does not transfer to the factoring company when an invoice is purchased. If a client refuses or is unable to pay the invoice (due to bankruptcy), you (the seller) must buy back the unpaid invoice or exchange it with another receivable of equal or greater value. Since Recourse Factoring offers the least amount of risk to the factoring company, then this factoring agreement offers the lowest fees.

Non Recourse Factoring
With this method, the risk of insolvency and non-payment is completely transferred to the factoring company. If the client goes bankrupt or refuses to pay the invoice (for whatever reason), the factoring company cannot come back to you for payment. This method of factoring carries more risk for the factoring company and therefore factoring fees are higher.

Most factoring companies only offer Recourse Factoring and do not offer Non Recourse as an option. However my man at HSBC reliably informs me that they offer Non Recourse factoring so this probably explains why so many of my clients say that HSBC is expensive in comparison to others. But to my way of thinking what’s the point in having a factoring agreement if you are then going to be held liable for non payment of invoice?

About the author: Paul Stanford http://www.paulstanford.co.uk/blog  has provided practical advice to hundreds of entrepreneurs for the past 5 years helping them to successfully start-up, transform and sell their businesses. Get in touch to see how his business http://www.4momentum.co.uk can help do the same for you. You have full permission to reprint this article provided this box is kept unchanged.

Copyright 2008 Paul Stanford

Posted by: Paul Stanford

Reclaiming VAT on your business mileage

You must have been living in a deep underground cave for the past year if you haven’t noticed the soaring cost of fuel. Cleary this is something that will hurt any of us that are running small businesses and need to run vehicles for whatever reason.

OK so this is nothing that you didn’t know already. But how many of you reclaim business mileage? Well if you do and you are VAT registered then did you also know that you are entitled to reclaim the VAT on the fuel element of the mileage allowance?

Let’s be clear this has nothing to do with fuel scale charges. How it works is something like this. Let’s say you claim 40 ppm for each business mile you do. A certain amount of this 40p is for the fuel element (the remainder being for servicing, road tax, insurance etc) and this varies depending upon the engine size and fuel type that your vehicle uses. For example for my car the fuel amount is 13p. Therefore I am able to reclaim approx. 2ppm of that as the VAT element (13/47*7=2).

OK this might not sound like much but if you are doing 10,000 miles per year and run a fleet of 20 company cars then the figures add up. Plus as one large retailer would put it “every little helps”

For further details see http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm and make sure you are getting your share of your VAT back on fuel.

Paul Stanford is a Director of 4Momentum http://www.4momentum.co.uk. 4Momentum provides business advisory services to small businesses, charities and social enterprises primarily in Sussex. Services include advice on starting a business, growing and transforming a business and selling a business. Clients typically contract 4Momentum for short periods of an hour to long term consultancy over many months for advice on subjects such as mentoring, business planning, sales and marketing advice, bidding for contracts, raising finance and general business advice. Paul is approved by the UK Government to deliver business advice on their behalf through Business Link and is a member of the Institute of Business Consultants. Visit his blog at http://www.paulstanford.co.uk/blog

Copyright 2008 Paul Stanford

Posted by: Paul Stanford

To Buy Or Not To Buy?..

When starting a new business, many people think of starting from scratch. There could be good reasons for this (for example it could be a completely new idea or product that hasn’t existed before) but more likely the new entrepreneur has not considered any other option than setting up from nothing. One alternative is, of course, to buy an existing company.

Both have their advantages and disadvantages. If you are going to start from scratch then you will be starting from a base of zero. You won’t have any existing client base, any suppliers, any contracts, any premises, any staff or any income from day one. However you also won’t have any legacy or be held back with any preconceived ideas or outdated policies and procedures or any bad debt. Buying an existing business will give you access to an existing client base, income straight away, premises, employees, brand name, contracts and suppliers. It could also bring you bad debt, a poor brand image and hold you back with legacy processes, staff and supplier contracts.

So the message is do your homework and do your planning. If buying an existing business – ask the question “why are you selling it” and if you are not entirely happy with the answer then be very cautious. There are many genuine reasons for someone wanting to sell their business – they could want to retire, there could have been a death, they could be moving away or it could always have been part of a well defined plan. Equally it could be because the business is on the verge of bankruptcy. But go in with your eyes wide open, ask the right questions, draw up the right contract and you could bag yourself a bargain. Buying an existing business could save you £1000s in start up costs and propel you several years ahead of where you would be if you started from scratch.

Equally it’s a good idea to consider buying an existing business if you already run a successful business and want to expand. Similar rules apply of course!

Paul Stanford is a Director of 4Momentum http://www.4momentum.co.uk. 4Momentum provides business advisory services to small businesses, charities and social enterprises primarily in Sussex. Services include advice on starting a business, growing and transforming a business and selling a business. Clients typically contract 4Momentum for short periods of an hour to long term consultancy over many months for advice on subjects such as mentoring, business planning, sales and marketing advice, bidding for contracts, raising finance and general business advice. Paul is approved by the UK Government to deliver business advice on their behalf through Business Link and is a member of the Institute of Business Consultants. Visit his blog at http://www.paulstanford.co.uk/blog

Copyright 2008 Paul Stanford

Posted by: Paul Stanford

Tips to survive the “credit crunch”

One of the key questions I get asked lately when seeing businesses is what to do about the “credit crunch”. Well here I have put down a few tips of how to keep afloat and ride out the storm. Remember that business activity is always cyclical so if you can survive the downturn then you will be able to take full advantage when the economy swings back up again.

·         Remember – your business needs to have enough cash to survive. Businesses go bust because they run out of cash and not because they are unprofitable

·         Reduce your overheads where possible. This can involve taking some difficult decisions such as reducing staff (usually your biggest overhead)

·         Sell off any hard to shift stock or underutilised plant. Forget what they may have originally been worth or what you may have paid for them – it’s what they are worth now that is important. So sell them for what you can now as they will be worth less later

·         Shop around for the best deals from suppliers and utility companies

·         Chase up any unpaid invoices. Remember it’s not a sale until the bill had been paid!

·         Write a cash flow forecast with a month by month breakdown of target income and budget expenditure. Do this for at least 12 months. It will help provide a direction and benchmark….and also the lowest (most critical) month for cash flow

·         Try and raise your overdraft rather than take out a loan as you only pay for the what you use of the overdraft

·         Keep marketing! Remember it is easier to sell to your existing clients than find new ones. So keep up with the newsletters, promotions, special offers, loyalty schemes and refer a friend schemes

Remember to focus on having enough cash and you will be a survivor turned predator when the economic cycle turns from bearish to bullish.

Paul Stanford is a Director of 4Momentum http://www.4momentum.co.uk. 4Momentum provides business advisory services to small businesses, charities and social enterprises primarily in Sussex. Services include advice on starting a business, growing and transforming a business and selling a business. Clients typically contract 4Momentum for short periods of an hour to long term consultancy over many months for advice on subjects such as mentoring, business planning, sales and marketing advice, bidding for contracts, raising finance and general business advice. Paul is approved by the UK Government to deliver business advice on their behalf through Business Link and is a member of the Institute of Business Consultants. Visit his blog at http://www.paulstanford.co.uk/blog

Copyright 2008 Paul Stanford

Posted by: Paul Stanford

Private investment – making your business more attractive

Much has been written lately about the potential benefits of investment from private investors for small businesses. So I’m not going to go into these but I do want to tell you how you can potentially make your business more attractive to a potential private investor from a taxation perspective

Clearly you have to have done your homework and present a solid business plan which is backed up by realistic financial forecasts, appropriate research and considered assumptions. You also need to be able to deliver a good pitch to potential investors.  But you can also make your business more attractive by making it a more tax efficient proposition for your investor.

So how do you go about this? Well one way is to register it for EIS (Enterprise Investment Scheme). This is a process that you do with HMRC – it costs you nothing but could make a real difference to your investor. Essentially a business that has EIS will mean that an investor will get 20% tax relief on his investment (up to a maximum of £500,000 pa) provided the shares are held for at least three years.  In addition, EIS offers investors capital gains tax deferral and 100% inheritance tax relief. 

Hopefully you can see that if an investor is looking to invest in a business then he is likely to invest in the one that has EIS over the one that doesn’t, assuming both businesses are of equal standing in other respects.

Paul Stanford is a Director of 4Momentum http://www.4momentum.co.uk. 4Momentum provides business advisory services to small businesses, charities and social enterprises primarily in Sussex. Services include advice on starting a business, growing and transforming a business and selling a business. Clients typically contract 4Momentum for short periods of an hour to long term consultancy over many months for advice on subjects such as mentoring, business planning, sales and marketing advice, bidding for contracts, raising finance and general business advice. Paul is approved by the UK Government to deliver business advice on their behalf through Business Link and is a member of the Institute of Business Consultants. Visit his blog at http://www.paulstanford.co.uk/blog

Copyright 2008 Paul Stanford

Posted by: Paul Stanford

Protecting your income

Posted by: Paul Stanford

Grants for Recycling Equipment

From September 2008, businesses operating in the South East of England will be eligible to enter a competition to obtain a grant to help fund the capital cost of recycling equipment enabling them to do more recycling.

The next Invest in Recycling grant competition will be announced in September 2008. The competition will be for capital grants for businesses to purchase equipment to create financial value from waste streams and divert material from landfill. The grants can cover up to 50% of the costs for new equipment up to a maximum grant value of £134,000.

The primary focus for support will be equipment addressing the Construction and Demolition waste industry but other areas which will be considered for support are:

• Food Waste (non-agricultural)
• Waste Wood
• Innovative Reprocessing and Recycling Solutions

For more details see http://www.envirobusiness.co.uk/invest-in-recycling.html

Paul Stanford is a Director of 4Momentum http://www.4momentum.co.uk. 4Momentum provides business advisory services to small businesses, charities and social enterprises primarily in Sussex. Services include advice on starting a business, growing and transforming a business and selling a business. Clients typically contract 4Momentum for short periods of an hour to long term consultancy over many months for advice on subjects such as mentoring, business planning, sales and marketing advice, bidding for contracts, raising finance and general business advice. Paul is approved by the UK Government to deliver business advice on their behalf through Business Link and is a member of the Institute of Business Consultants. Visit his blog at http://www.paulstanford.co.uk/blog

Copyright 2008 Paul Stanford

Posted by: Paul Stanford

Starting a business – insurance

Often when I go to see a client that is considering starting a business for the first time I get asked questions about insurance. Usually do I need to have insurance and if so what sort of insurance? It’s also quite surprising sometimes to find that established businesses don’t know what insurance they should have. So here is a simple guide to setting up a business and insurance. Depending upon the nature of your business you may need the following forms of insurance which are compulsory for your business:

·         Employers’ Liability – if you intend to employ staff

·         Motor Insurance – if you have business vehicles or use your own vehicle for business purposes

·         Professional Indemnity – necessary for certain professions e.g. Accountancy & Law, business advice!…

Other forms of insurance are discretionary, but often advisory, plus their presence can add to the professional image and credibility of your business. Certain contracts with for example the Government Sector will also require you to have insurance at specified levels of cover. So make sure you are aware of this if you are intending doing business with Government and other large companies. In order to help decide what other forms of insurance you may wish to take on you should consider the risks involved, the consequences of being uninsured, and the cost of the insurance. Some common forms worth considering are public liability, buildings & equipment, product liability, business interruption (sickness/disaster), key person and goods in transit.

Clearly as with any insurance it is advisable to shop around to ensure you are getting best value and make sure that the cover is adequate for your business requirements. It is often a good idea to check if the professional body (assuming there is one) for your industry offers any insurance as it is likely to be better value that you can get on the open market. Other good places to try are bodies such as the Federation of Small Business.

Paul Stanford is a Director of 4Momentum http://www.4momentum.co.uk. 4Momentum provides business advisory services to small businesses, charities and social enterprises primarily in Sussex. Services include advice on starting a business, growing and transforming a business and selling a business. Clients typically contract 4Momentum for short periods of an hour to long term consultancy over many months for advice on subjects such as mentoring, business planning, sales and marketing advice, bidding for contracts, raising finance and general business advice. Paul is approved by the UK Government to deliver business advice on their behalf through Business Link and is a member of the Institute of Business Consultants. Visit his blog at http://www.paulstanford.co.uk/blog

Copyright 2008 Paul Stanford