Unpaid Bills on the increase for SMEs

Unpaid bills to SME businesses are now at the highest level (£35.3 billion) in almost five years, according to Bacs, with combined debts up by almost £2 billion compared to the first half of last year.
Bacs found that the average amount owed to small businesses stood at £45,000 at the end of 2011, up from £39,000 earlier in the year.
Additionally the average company is waiting 29.5 days longer than agreed payment terms to have their invoices settled, and that figure is also up, rising from 28 days reported in the first half of 2011. With large businesses insisting on payment terms of as much as 120 days, many suppliers could be waiting up to five months to be paid for work.
There’s an old saying that ‘a sale is not a sale until it is paid for’. This statement, amplified by the findings of the above research, serve to underline one of the biggest problems for SMEs – getting paid on time.
The quicker you can get paid in the current unforgiving environment, the better your cash flow and your business performance.

Islamic Finance

Islamic finance is a market worth over £ 1 trillion and UK banks are keen to break into this marketplace.

Sharia finance is derived from the religious text of the Koran. It follows three basic rules:

·         Devout Muslims must not be involved with markets that are considered sinful, such as gambling, alcohol, tobacco, arms, cinema, pornography or anything to do with pig meat.

·         They must avoid taking risks, such as investing in hedge funds and spread betting

·         It bans the payment of interest. In other words you are not allowed to create money by money. This rule makes it hard to use Western banking products such as loans, mortgages and savings accounts.

Trading and investing for profit is permitted, but on the basis of partnership, in which the risk and profit are shared between two parties. This means that if you put money into accounts in Islamic  banks you do not earn interest but you earn a profit share in the activities of the bank. If you want a loan to buy a car you are not given a loan, the bank buys the car for you at an agreed price.

Buying a house has often been a major problem so one way to achieve this is for the Bank to buy the property and lease it back over a 25 year period, without charging interest and then selling it at an agreed price to the occupier.

You would think that as Sharia banks could not invest in risky loans that they might have escaped the financial crisis, but you have to remember that they did invest, as described above, in property and so they were not immune, but due to their main geographical market areas they were much better off than Western banks.

Western banks are increasingly taking an interest in this market. Citigroup, HSBC, Lloyds, TSB, RBS, Barclays, Bank of Ireland, Standard Life and UBS are all now offering Sharia compliant products.

The Bank of London and the Middle East and the Islamic Bank of Britain offer some of the best rates of return available, but you do not earn interest. Instead they act as your ‘agent’ in making Sharia-compliant investments; they will monitor the deposit to ensure the agreed profit rate is met.

The Islamic Bank of Britain has had a significant impact on the UK and European financial industry.  The Bank was authorised by the UK’s Financial Services Authority in 2004 and is the UK’s only wholly Shariah-compliant retail bank.  The Bank has continued to maintain this position and still remains the only Islamic retail bank in the UK and Europe.  It is considered a pioneer of retail Islamic banking and currently offers the largest range of Shariah-compliant retail financial products to the UK consumer.

The UK was the first member of the EU to authorise Islamic Banks, as a result, according to the CityUK Islamic Finance 2011 report, there are 22 banks in the UK offering Islamic finance products.  This figure exceeds that of any other Western country. There were five Sukuk (Islamic bond) listings at the London Stock Exchange (LSE) in 2010 and one in early 2011.  This brings the aggregate total at the LSE to 31 listings worth $19 billion. Islamic funds managed in the UK have combined assets of $300 million.

Islamic banking is now well established in the UK and is worth considering even if you are not a Muslim but are interested in a more ethical method of banking.

Business Funding Queries Event: 4th October, Peterborough

Peter Kelly of Pegasus Funding Resources is on the panel of the Business Funding Queries Event in Peterborough on the 4th October. The event is being held between 9:30 and 2:30 at the Kingsgate Conference Centre, 2 Staplee Way, Parnwell, Peterborough, PE1 4YT.

The event is being run by the Greater Cambridge, Greater Peterborough Enterprise Partnership.

For more details contact: patricia.taylor@opportunitypeterborough.co.uk

or call 01733 317417

SMALL BUSINESSES GIVEN AN ADMIN BREAK

Around 100,000 UK businesses are set to save millions of pounds in administration costs and accountancy fees under proposals announced by the government.
Business secretary Vince Cable has revealed plans to allow more companies to decide whether to have a statutory audit or not to try to reduce auditing and reporting requirements. 
Furthermore, the majority of subsidiary companies will not have to complete a mandatory audit, as long as the parent firm guarantees its liabilities.
Dr Cable said that changes have been prompted by reporting requirements becoming "increasingly demanding and costly over the years.
He added; 
"Tackling these problems will help save UK companies millions every year and free them up to expand and grow their business, which ultimately benefits the entire British economy."
It comes after the Chartered Institute of Taxation found that "larger" small firms are finding it difficult to meet their tax obligations because of the administrative burden they face.

Record Exports

Record exports outside the EU helped to provide a sharp reduction in the UK’s trade deficit. The gap between imports and exports was the narrowest since the beginning of 2011, shrinking to £7.15 billion in July from £10.07 billion in June. Some economists had predicted a £9 billion gap.

Exports of goods surged 9.3% to £25.8 billion will imports shrunk by 2.1%. Oil exports and a decline in oil imports as well as more days worked were contributing factors. Exports to the Eurozone fell to their lowest ever recorded and exports to the rest of the World hit a record high.

This could well be a blip, but with the Eurozone taking a positive step last week in the German courts and better total employment figures and a reduction in unemployment, all be it small may point to a slowly improving economy.

NACFB figures: Lending to SMEs increases

New figures from the National Association of Commercial Finance Brokers show that lending to SMEs has continued to increase.

The annual survey of NACFB members found that commercial mortgages rose by 26%, and asset finance increased 100%. Asset finance brokers in particular have seen an increase in activity and lenders. These figures are consistent with growth in NACFB membership within this division during the past 12 months. There has also been growth in short-term lending of more than 40%.

Adam Tyler, chief executive of the NACFB, said: “The increases in invoice finance we had for four consecutive years have now flattened out, and in fact there was a modest decrease.

“Despite many lenders’ protestations that they are lending more than ever, these figures reveal what anecdotal evidence has already shown: that funding for businesses is still hard to access, but it has improved, if you know where to look.”

The NACFB has 83 different commercial lenders that are part of its 1,000-member organisation.

Adam concluded: “About 90% of small businesses bank with the four main high street banks; when it comes to borrowing, SMEs with our guidance are now reaching out to a wider variety of lenders.”

What Government funds are available to SMEs to help growth?

There are a number of funding options that are sponsored by the Government through the Department for Business, Innovation and Skills (BIS).

Enterprise Finance Guarantee Scheme (EFG): The EFGS replaced the successful SFLG Scheme, it is a loan scheme that has been designed for SME’s that meet the criteria, to obtain loans even if they do not have any security to back the loan. The lender is provided with a 75% from the government. 45 approved lenders have signed up to the EFG programme. Be aware, however, that all lending decisions are made by the provider and not the government and many lenders are still asking for personal guarantees from the borrowers even though they have a 75% guarantee from the government. Loans are available from £1,000 to £1,000,000 for SMEs with turnover of less than £45m. It is important to understand that these are not the most popular type of loans with the banks, due to their risky nature.

Export Enterprise Finance Guarantee Scheme (EXEFG): This is like the EFG Scheme but this time it is for exporters who meet the criteria who also lack the security that they would normally need. In this instance the Government provides the provider with a 60% guarantee. Only a few Banks have so far signed up for this scheme. These include HSBC, Barclays, Santander, RBS and Lloyds. These are for short term export loans of between £25,000 and £1,000,000. The SME’s must not have turnover over £25m. At present this scheme is closed to new applicants but it is hoped that it will be re-launched in a simpler form.

Business Angel Co-Investment Fund: This was created from a Regional Growth Fund and it can make investments of between £100,000 to £1m into high growth, early stage SMEs. They particularly like those areas that were hit hard by spending cuts. Their investments sit alongside other investments that have been made by business angels. There are some geographical restrictions and the sum investment must not be more than 49% of the total required.

Enterprise Capital Funds (ECFs):  The ECF Scheme seeks to bridge the equity gap between private investors and what the struggling innovative SME’s actually require to reach their growth potential.

Business Finance Partnership (BFP): The BFP aims to ease the flow of credit to businesses in the UK by helping to diversify the sources of finance available to them. It is part of a £21 billion programme of credit easing measures announced in the Autumn Statement 2011 to support smaller and mid-sized businesses that do not have ready access to capital markets. The Government has already committed to spend £700 million through managed funds that lend directly to mid-sized businesses in the UK.

The BFP will initially invest a sum of £1billion in loans alongside private co-investors. Actual terms have not yet been published but it is believed that SMEs with turnover of less than £500m will be able to apply. This scheme will enable SMEs to access funding through non bank lending channels.

The small business tranche of the BFP will focus on co-investing through non-traditional channels, such as peer-to-peer platforms, supply chain finance and mezzanine finance for businesses with a turnover below £75 million.

Provided turnover is below an average of £75 million over three years, the end recipients of the scheme can be any sort of UK small businesses (partnerships, private companies, employee owned) operating anywhere in the UK and in any sector. BIS will invest up to a maximum of 50 per cent in any fund or channel, on fully commercial terms

For further information go to the Department for Business, Innovation and Skills’ website : http://www.bis.gov.uk/