Business Finance Archives - Page 8 of 8

Looking to buy vehicles for your business?

Posted on August 3, 2017 Written by Administrator

The imminent arrival of the new 67 plates in September is, as always, getting people excited about picking up that new vehicle.

For private buyers, the processes and sometimes pitfalls are well-known. However, if you’re a relatively new business, you may not be so au fait with the realities of life.

While buying a new commercial vehicle (for simplicity’s sake, here we’ll call any vehicle being purchased for business reasons “commercial”) then you should be prepared to enjoy yourself. Yes, take it seriously because it’s a lot of money but concentrate on the positives!

Even so, there are a few things you need to be aware of and prepare for, in advance.

Funding

If you’re a new small business, then there’s a fair chance you’ll be operating as a partnership, sole trader or perhaps micro-enterprise Ltd company.

Typically what that means is:

for some lenders, perhaps like the banks, you’ll have little commercial history and that will make them uneasy about lending. From their viewpoint, your business will be largely invisible and off the radar;
with no trading history, some lenders will look more closely at your own personal credit score. A few issues will by no means be a showstopper but some lenders or finance providers may be more understanding than others;
remember that while the vehicle provider may have finance options on the table, this can make things very complicated for you in terms of driving a hard bargain on the vehicle’s price or trying to be hard-nosed when reviewing your finance interest rates etc.

It’s perhaps understandable if a business wants to get started ASAP with their commercial vehicles rather than spend time sit around examining funding models and associated costs. Try to resist that temptation though and make sure you’ve adopted a hard-headed approach, with expert advice, before rushing off to the vehicle showrooms.

Accounting

The UK has one of the higher proportions of company car ownership (or use) in Europe. However, take the advice of your accountant before deciding how to deal with commercial vehicles officially described as “company cars”.

There are some technical issues here relating to things such as depreciation and accounting entries and they will be decided, in part, by how you’re paying for the vehicle. It’s easy to get this wrong so be sure to take advice before making your decision as to how to purchase your vehicle.

In passing, also look closely at the idea of “fully expensed” cars in accounting terms. At one time, there were very major taxation advantages to operating on that basis but these have been eroded to such an extent by HMRC that many accountants will argue today that there is no longer any point in trying to include private mileage etc.

That position is not likely to change!

Think about who will drive it or them

It’s perhaps stating the obvious but don’t forget that if any of your co-workers who will be driving the vehicle has motoring convictions or is young or inexperienced then your insurance premiums may soar.

In some cases, it might be more cost-effective for you to pay their expenses for using their own vehicle on their insurance but remember to ensure they have changed their cover to commercial use. You may need to reimburse them accordingly and agree an equitable mileage rate.

Take accounting advice here too.

Practice Loans for VAT Funding

Posted on July 20, 2017 Written by Administrator

Value Added Tax – or VAT as it is universally known – was introduced in the UK in 1973 as part and parcel of its admission to the European Union.

Now that the UK government is negotiating an exit from the EU, it might be fair to ask about the future of a tax that is founded very much on European principles. However, it is also clear that the UK has been going very much its own way as far as VAT is concerned – and a clear illustration is given by the fact that the standard rate of VAT in Europe is just 15%, whilst it is currently 20% in the UK.

Inside or outside of Europe, therefore, it seems clear that the UK is going to continue to raise revenue through a VAT and that this tax obligation is likely to remain a major issue for any professional practice.

Current VAT rules

Any business (including one structured as a partnership) with an income over £85,000 must register with HM Revenue & Customs (HMRC) as a VAT-registered business.

This means that you must levy VAT on a wide range of the goods and services you provide, but may also reclaim the VAT on goods and services which your business has bought.

The calculation of VAT charged and VAT paid is the subject of a return you must make to HMRC every three months, together with your payment of the net amount due.

VAT is charged at different rates, according to the particular goods or services sold, and may be at the standard rate of 20%, a reduced rate of 5%, a flat rate (typically between 4% – 14% depending on your business actitives) or be zero-rated for VAT purposes.

It is chargeable on an especially wide range of items, such as:

the goods and services your business sells;
any goods you hire or loan to a customer;
business assets you sell;
commissions you charge;
goods and services you sell to your staff;
goods owned by your business, but for your personal use; and
non-monetary transactions, including gifts, part exchange and barters.

Clearly, every profession is in the business of providing different goods and services – health care provided by doctors to NHS patients is VAT-exempt, for example – and the calculation of VAT liability may vary widely from one profession to another and from one practice to another.

Practice loans for VAT funding

However robust and carefully managed your practice budget, VAT liabilities may impose a decided strain on your cashflow and the availability of essential working capital.

Yet VAT demands are relentless in their regularity – coming around every three months – and represent a liability that may be met with fines and penalty charges by HMRC if the liabilities are not paid or are paid late.

This raises decisions your practice may need to make about borrowing to meet those VAT liabilities. Your decisions fall into two broad categories:

Secured loans

your practice might already have one or more secured loans – secured against the personal assets of the firm’s partners;
such borrowing is typically quite long-term (10 years or more) and repayments over the full term of the loan are likely to include a considerable sum in interest;
partners offering the security of personal assets do so at some considerable risk, since financial failure of the business may mean that repayments on the loan cannot be maintained and the assets may be forfeit;

Unsecured loans

if you are looking for practice loans for VAT funding, however, you are more likely to be in search of much shorter-term borrowing;
this is where an unsecured fixed rate loan, for, say, three or 12 months may provide the more realistic solution – and may help to spread the costs of meeting your VAT liabilities over the repayment period you choose;
the shorter timescale means that interest charges also accumulate over a considerably reduced period;
such unsecured loans for your professional practice are typically advanced at a fixed rate of interest and require fixed monthly repayments, making cashflow management more straight forward and less onerous;
you may be given the option of your loan being paid directly to HMRC or into the bank account of your practice; and
you may also have the option of continuously rolling over one short-term loan into the next, thus giving your practice a permanent source of funding to meet not only this quarter’s VAT liabilities, but those well into the future.

VAT liabilities may be a headache for any professional practice, but, with the help of practice loans for VAT funding, your essential cashflow management and the ability to spread out the costs over the period you choose may prove a godsend.

Finance Options for Business

Posted on July 14, 2017 Written by Administrator

The tone of this brief piece is going to be up-beat and positive.

Business finance IS available out there and it can help you make a success of your enterprise.

However, let’s get one brief “dose of cold water” statement of reality out of the way first.

Finding business finance isn’t easy

Whether you’re a start-up or business already in-flight, business funding isn’t handed out on every street corner. You’re going to have to work to find and then obtain it.

That consists of two main aspects and they’re sometimes showstoppers for the unwary:

you need to go to sources of finance that are suitable for your particular business situation (unless you want to waste a lot of time being turned down not because your proposition lacks merit but simply because you’re speaking to the wrong type of lender);
whoever you’re speaking to, your proposition MUST be up to professional standards and show that you understand your business and of critical importance – its current financial position. Poorly presented finance requests are the biggest single cause of funding refusals.

Sources of funding – start-ups

You need to recognise that to potential investors, a start-up business is often one of the riskier things to invest in. Yes, the rewards are potentially high but so are the risks.

Your main sources where finance may well be available for the right ventures are typically:

the banks. A conventional channel and one that has been the source of much public criticism since 2008 but which is, nevertheless, an ongoing option. Anticipate needing to find some potentially hefty financial contribution from your own personal resources;
Business Angels / equity funding. Typically much more entrepreneurial than the banks, they may inject money into start-ups in return for a share of ownership of the company. Note that many business angels only deal through intermediaries who have already vetted the proposition on the table for credibility. They might also be more inclined to invest in companies who have at least some trading history behind them;
the government. Things here tend to change over time but the government does help with business start-up funding both directly and indirectly through tax-breaks for business angel investors etc.
friends and family. There are good reasons why it’s advisable to keep your business finance and family/personal lives separate but even so, this is a potential source of funding that shouldn’t be overlooked.

Business growth and expansion funding

Here, your channels might typically be slightly different:

Business Angels. These are potentially risk-inclined investors and providers of finance options for business. Be aware though that you’ll need to be on your toes in terms of the quality of your proposition and will also need to present your trading history to date in order to be taken seriously. Again, many Business Angels will only consider applications from specialist business finance providers who they know will already have reviewed and approved the proposition in principle;
equity release. Many owners of businesses have considerable sums (equity) tied up in things such as property. Accessing that equity, with help from those same specialist business finance providers, can be one of the most cost-effective and easiest finance options for business. Not only that but you won’t have to share ownership and control of your company.

So, if you’re thinking that finance options for business are almost non-existent in today’s world – think again!