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UK small businesses plan ahead despite Brexit paralysis

More than two in three (68%) small business owners have put plans in place to grow their business over the next three months, and even 59% those that fear they will struggle to survive in an uncertain year are working on positive plans to turn their business around, according to new research from Hitachi Capital Business Finance.

The findings come at a time when the proportion of UK small businesses predicting growth has hit a five-year low (down from 39% to 34%). Nonetheless, despite prolonged Brexit uncertainty, the new Hitachi data reveals a tenacity and determination among the UK small business community to keep calm and carry on, even through an unprecedented period of political and economic change for the country at large.

The Hitachi data also suggests it is Britain’s youngest small businesses that are the most can-do in putting growth plans in place for the first three months of 2019. Overall, 87% of business owners aged under 35 have been working on new growth plans (compared to 55% of those aged 55 or over). Further, the UK’s youngest businesses (those trading for less than five years) were most assertive in working on new growth initiatives (71%). With London and Manchester growing as the UK’s top tech hubs (and cities for tech jobs), the Hitachi research also noted that London (78%) and the North West (71%) were the regions where small businesses were most likely to be tackling Brexit uncertainty with proactive growth plans.

What are small businesses prioritising to achieve growth?

As part of the latest instalment of Hitachi Capital Business Barometer, which tracks small business outlook and confidence over time, Hitachi asked a nationally representative sample of 1,177 small business decision makers which initiatives they were considering in order to achieve growth in the three months to April 2019. The results paint a picture of what the small business community will be prioritising during the critical Brexit transition period in the weeks ahead.

Keep costs down and carry on

The number one issue for small businesses was controlling fixed costs. During a period of rising rents, business rate hikes and a weak pound, 41% of respondents said cost control was a top priority to help their business grow in uncertain times.  As the perceived importance of cost control hits a five-year high, a further 18% of respondents said they intended to tackle late payment. Despite recent moves by the Government to tackle this issue, there is no evidence that anything as dampened this issue for small business owners. Concern over tackling late payment is at its highest level since the start of 2017.

Cashflow remains king

Improving cash flow has also hit a five-year high as a priority for small businesses to tackle (22%). The perceived need to tackle this issue was most prevalent in the manufacturing (40%), distribution (38%) real estate (38%) and retail (33%) sectors. It was also a bigger issue among larger SMEs with a turnover of £10m or more – ventures that have more complex infrastructures and bigger cost bases to manage.

Expanding the business footprint

Expanding into new overseas markets (16%), hiring more people (15%) and investing in new equipment (12%) were all popular initiatives to secure growth, although in all these areas there was a slight dip on 2018, suggesting some small businesses could be putting on hold physical expansion plans until there is greater certainty on the Brexit outcome.

Looking an industry sectors, small businesses in agriculture were most likely to be planning to invest in new equipment (31%). Expansion into new overseas markets was led by the IT and telecoms sector (49%) and enterprises in the media and marketing sector (34%). Small businesses in the IT and telecoms sector were also those most likely to be hiring new staff in the months ahead (35%).

Initiatives that small business owners are considering to achieve growth in the three months to April 2019

Q1 2017 Q3 2017 Q1 2018 Q3 2018 Q1 2019
Keeping fixed costs down 37% 32% 36% 37% 41%
Improving cash flow 20% 19% 19% 20% 22%
Being stricter with getting paid on time (e.g. from clients) 17% 17% 14% 16% 18%
Expanding into new markets/ overseas 20% 15% 18% 15% 16%
Hiring more people 17% 13% 15% 16% 15%
Investing in new equipment 14% 11% 13% 14% 12%
Reassessing finance commitments 8% 8% 8% 10% 8%
Streamlining supply chain 6% 6% 6% 6% 6%
Seeking financial funding via a partner/ company other than our bank 6% 5% 5% 5% 5%
Moving to a different location/ bigger office 5% 6% 5% 6% 5%
Securing financing to replace a vital business asset(s) 2% 1% 2% 2% 2%

Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance said, “We are all living with political and economic uncertainty at the moment, and getting used to living with it will become the new norm for most businesses in 2019. It is heartening to see so many small businesses going towards uncertainty and seeing it as a time to improve their business, get it in better shape and achieve growth. For smaller businesses that can adapt faster and move quicker, 2019 could be a year of great opportunity.

“That said, finance is going to be key, possibly more so than ever. At a time of uncertainty, cutting fixed costs and strengthening cash flow will be a fundamental requirement for many small businesses in order to simply operate. Beyond that, getting the right kind of finance deals and support is crucial.

“More than ever before, small businesses need access to specialist financial solutions that can nurture growth and expansion without placing undue pressure on cashflow. At Hitachi Capital Business Finance we have a range of financial products that do just that.

“Our heritage is in manufacturing not banking and as a leading finance provider we are in the business of helping small businesses growth through all the stages of an economic cycle. It makes business sense to help business customers stay in business and grow – and we will be expanding our support for the small business sector during 2019.”

Source: London Loves Business

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‘No deal’ Brexit prompts expectation of increase in demand for business loans

As predictions have emerged of an upsurge in borrowing demand from SMEs if a ‘no deal’ Brexit occurs, owners of small businesses are being urged to fully acquaint themselves with the terms of a personal guarantee backed loan, before signing on the dotted line.

Todd Davison, director of Purbeck Personal Guarantee Insurance said, “It is widely anticipated that there will be an increase in demand for loans as SMEs look to introduce additional working capital buffers in a bid to ride out any impact on business following a “no-deal” Brexit.

“Additional funding to aid cash flow may help to offset downturns in trade or disruption within the supply chain. But the reality is that most commercial funding will need a Personal Guarantee and this commitment should not be taken lightly.

“As the UK’s only provider of Personal Guarantee Insurance to SMEs, we would urge the Directors of SMEs to fully consider their options and the risks, particularly in the current uncertain economic climate.   It’s vital Directors seek independent advice, and ensure they have investigated what alternative funding may be available.  If a Personal Guarantee backed business loan is the right solution, they should ensure they’re comfortable with all the terms of the guarantee.”

Top facts to check before signing a personal guarantee for a business loan:

  • How will the lender enforce the guarantee?
  • Can the lender serve notice or seek payment on demand?
  • What exactly constitutes a default?
  • Do the terms allow for any remedy period upon default?
  • How will your net personal assets be assessed prior to the giving of the guarantee, and is this is likely to change?
  • Does the contract state that the lender must exhaust every other avenue before making demands on you?
  • Have you considered the cost of obtaining personal guarantee insurance?

Todd Davison concludes: “Personal Guarantees are likely to be requested by every business lender. Directors of small businesses should be clear on the terms of the guarantee, and should have contractual clarity on all eventualities. They should be as genuinely objective as they can about the financial prospects of their business and its commercial value too. It’s essential to remember that a Personal Guarantee is not a hypothetical assurance, creditors can and will enforce them.

“Because they significantly increase risk for the borrower, Personal Guarantees can cause enormous stress. It’s therefore advisable to get Personal Guarantee insurance against the risk that the Guarantee is called by a lender. It will offset any outstanding obligations called in under a Personal Guarantee. The level of cover is based on a fixed percentage of the Personal Guarantee the company director wishes to insure and this is dependent on whether the corresponding finance facility is secured or unsecured.”

Source: London Loves Business

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Alternative funding sector buoyant despite Brexit concerns

The alternative funding sector ‘sustained its willingness to think outside of the mainstream’ in 2018, according to Independent Growth Finance (IGF) boss John Onslow, although Brexit remains its “single greatest barrier”.

IGF provides flexible, asset-based funding to small and medium-sized enterprises (SMEs) across the UK.

John Onslow told Insider more companies are turning to alternative finance as it can be “key to achieving real growth without diluting equity”.

He added that the market had been driven by high liquidity levels in 2018, as well as high publicity for the sector itself.

However, on the UK’s exit of the European Union, Onslow said: “Uncertainty over Brexit has caused some investment to be deferred this year and the implications of Brexit remain the single greatest barrier. 2018 has challenged the resilience of business.”

Research by IGF found that 500 SMEs in the £1m to £100m-turnover bracket said Brexit was their greatest concern. A third had experienced problems with funding requests being rejected, along with issues relating to slow decision-making or turnaround times.

Onslow added: “Political considerations – including Brexit and highly-profiled trade wars – have captured the consciousness of even the smallest SME.

“Despite the SME Health Index finding business confidence has declined, in IGF we have seen a sustained stream of SMEs achieving real growth in 2018, working hard to drive their momentum.”

The firm has also overcome challenges by working with business introducers across the UK and by investing in its staff. In the 12 months to 30 September 2018, IGF’s funds advanced were up by 70 per cent.

“The challenge is to stay relevant and ahead of market trends, whilst delivering value for money through excellent service,” Onslow told Insider.

IGF is headquartered in Redhill, Surrey. In November 2018 it was named Insider‘s Alternative Funder of the Year at the Central and East Dealmakers Awards.

Source: Insider Media

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Best Ways to Fund Small Business

Small businesses may need extra funds for various reasons. When a market is growing, the company will be in need of additional money.

Clients could be late on paying the invoice, or some clients may cancel collaboration with your business. Small business needs steady cash-flow to get ahead of the competition and grow on the expected rate. Small business financing is not a difficult task, but it includes lots of tools. Today we would love to compare different financial tools.

Traditional Bank loans

After a market crash in 2008, getting traditional bank loans became very hard. That’s a complicated process, especially for small businesses. Most of the small business has no huge credit history with financial institutions so that they will end up with a declined request.

Banks always ask you about lots of stuff. They will ask about the past relationships with the banking system, and you may also give them your business credit score. As for today, it’s a very tough task to get approved by the traditional bank loan system. Banks only accept up to 25% of applications. As for the quick cash, traditional banking loan is not an attractive financial tool.

Business Line of Credit

When financial institutions give you access to a certain amount of money, it’s called a line of credit. They give you a chance to access specific budget whenever your business needs.

That’s exciting tools for small businesses. The company can take any amount from that budget and replenish it anytime. As you recharge it, you can start the same cycle again. That’s a win-win position for both, small business and financial institutions.

Unlike the traditional banking loans, you don’t have to follow a specific monthly schedule to pay for credit. With a line of credit, you take the money and replenish it anytime your company can use the payback.

Keep in mind that a business line of credit is only for a certain amount of money, and you can’t use for big goals.

Invoice factoring

It’s a very easy and straightforward process. When a small business has unpaid invoices, owners can get in touch with “factoring” companies and sell unpaid invoices to them.

It’s not a traditional loan; your company gets paid for the work that’s already done. Well, it has some side effects you may face while using it.

The factoring company will need access to personal information of customers so that it may be a problem for small business. Most clients don’t want to give their personal information to third parties so that they will complain. Be ready for complaining from customers, if you choose invoice factoring as a financial tool.

As for today, there are different ways to fund your small business rather than traditional banking loans. You may need to hire new faces in the company or buy new equipment for efficient work. No matter what is your reason, as a small business owner, you’ll always be in need of extra funds. Steady cash flow means too much for companies, so choose a reliable and trusted financial tool wisely, before going for it.

Source: FinSMEs

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How the Autumn Budget will affect SMEs

The Chancellor’s Budget announced earlier this week by Philip Hammond has promised an ‘end to austerity’ for Britain. With numerous policies to help first-time buyers, lower incomes and housing, we look at how the new Budget will impact the SME marketing in the UK.

A significant change will be the Chancellor’s attempt to help fledging high-street businesses, who have certainly felt the pinch over the last year, with noticeable casualties such as House of Fraser, BHS, Byron Burger and Jamie’s Italian.

In a move to better the current situation for high street businesses, Hammond has pledged to cut business rates by a third for all retailers with a rateable value of £51,000 or less for the next two years. This will help retailers save up to £8,000 per year and that includes high street shops, pubs, restaurants, cafes and other small business owners that are losing ground online.

A further £675m has been assigned as a Future High Streets Fund, to aid the transformation of the UK’s high streets, to improve footfall and regenerate areas in need of redevelopment.

For entrepreneurs, the start-up loan scheme originally founded by Rt Hon David Cameron will be backing a further 10,000 new businesses – this includes seed funding, start-up capital, merchant loans and business finance. A further £200m has been put aside by the British Business Bank to replace funding which they are likely to lose from the EU following the Brexit deadline in March 2019.

For SMEs that take on apprentices, the training bill will be reduced from 10% to 5%, and the government will pay the remaining 95%. Those apprentices aged 16 to 18 and working in companies of less than 50 will continue to have their training full funded.

Losing out from the Budget will be the powerhouse tech companies who started abroad but operate in the UK and use schemes to avoid paying tax. Pointing out the likes of Google, Facebook and Amazon, the tax will be imposed on those firms with a global revenue of £500 a year and the increase in tax will put £400 million back in the UK government, when it comes into place in April 2020.

Elsewhere, a scheme has been planned to offer interest free loans those struggling with debt caused by high cost credit – relating specifically to unauthorised overdrafts, rent to buy and payday products. This will be based on a consumer level and not impact businesses or sole traders using guarantor, personal or bridging loan products.

UK roads and infrastructure are expected to get a huge boost at just under £30bn in investment and first time buyers in shared ownership schemes will have their stamp duty scrapped – giving them a saving of £10,000.

Source: FinSMEs

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SME-focused fund eyes potential after lending firms £2m

A fund backed by the Scottish Government specialising in loans to Scottish SMEs that have been turned down by larger lenders has so far lent £2 million, creating hundreds of jobs, it has been revealed today.

The Scottish Microfinance Fund (SMF) is managed and delivered by community development finance institution DSL Business Finance with additional support from the Start-up Loans Company and European Regional Development Fund.

It recently held a parliamentary reception at Holyrood to celebrate its first birthday, and has lent to more than 130 new and existing firms, helping create more than 200 jobs in the last year.

The fund has a dedicated £6m pot to lend SMEs up to £25,000, and is part of a larger £40m boost from the Scottish Government’s SME Holding Fund. Interest is 6 per cent a year, and it imposes no admin or early repayment fees, or hidden charges.

DSL executive director Stuart Yuill said: “We are approached by a huge variation of SMEs from all industries; from dental design studios and cafés to clothing and fashion companies.

“Taking the leap to start your own business is a daunting prospect for many entrepreneurs, especially in today’s economic and political climate, which is tough to adapt to. But there is huge potential for the SMF in 2018, and we’ve been heartened by the number of people we’ve been able to assist in Scotland… we’ve doubled our own team, with plans to recruit another loan officer for Edinburgh.”

SMF beneficiaries include Mike Stalker and Natalie King, founders of SK Dental Design Studio, who used its loan support to fully equip and fit out their studio as well as help with cashflow until the business becomes established. Stalker said: “We wouldn’t be here without the support of DSL and the SMF. We approached the banks for a loan, and they simply were not interested.”

The parliamentary reception was sponsored by Gail Ross MSP with a keynote address from economy secretary Keith Brown on the importance of continued business growth in Scotland. The fund aims to help tackle the much-cited issue of firms, particularly in Scotland, struggling to secure the funding required to achieve their scale-up goals. The inaugural Scottish Start-up Survey published last year found that 95 per cent of respondents said they needed extra capital to move their business forward, and seeing it as a bigger immediate concern than Brexit, for example.

Additionally, a study from Barclays published in November found that in 2016 the number of Scottish high-growth firms fell to 171 from the previous year. However, UK Chancellor Philip Hammond the same month unveiled in the Autumn Budget £2.5 billion for the British Business Bank, to support UK smaller firms looking to scale up and realise their potential.

Source: Scotsman

 

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The UK has the highest number of new business developments in a developed country despite Brexit

  • There were 218,000 new businesses in the UK last year, a 6% rise year-on-year. 
  • Other developed countries saw an average of just a 2% rise. 
  • Crowdfunding and peer-to-peer lending has been credited with this sharp rise in start-ups.

The UK outranked all other major developed economies in terms of the number of businesses established last year, according to figures from accounting group UHY Hacker Young.

It became home to 218,000 more businesses in 2016, a rise of 6% over year-on-year. Meanwhile, other major developed economies including France, Germany, Italy, Japan and the US saw an average 2% rise in number of businesses over the year.

The UK ranked sixth of the 21 countries studied by UHY, behind China, Pakistan, Vietnam, Malta and India. Across all the 21 countries, there was a 7.7% rise in established businesses.

“Enterprise and entrepreneurship in the UK have been gathering pace at impressive speed,” said UHY’s Daniel Hutson.

“As a range of new sources of funding gain traction in the market and the corporation tax burden lightens, the start-up climate is improving, financial pressures are easing and investment for growth is on the cards.”

UHY credited alternative funding sources, such as crowdfunding and peer-to-peer (P2P) lending, with helping to boost the entrepreneurial environment. The Conservative plan to lower corporation tax to 17 per cent by 2020 may also be helping to attract firms to the UK.

“The figures suggest confidence in the economic outlook, despite Brexit. Whether this is sustainable, given the uncertainties that still surround the ongoing negotiations with the EU, will be something the government will want to watch,” said Hutson.

While the UK had a total of 3.9 million businesses within its borders as of the end of 2016, China — which saw a massive increase of 19% — had 26.1 million.

The US fell in 13th place, with the number of businesses increasing by 2.1% over the year to 11m.

Source: Business Insider