Autumn Statement 2011: Small firms to miss out on credit easing benefits, say entrepreneurs

Two thirds of business owners believe that the new National Loan Guarantee Scheme will not benefit the UK’s smallest companies, research by BusinessZone.co.uk and AccountingWEB.co.uk shows.

In a snap poll of the 150 people who took part in a live blog of George Osborne's Autumn Statement on the two online communities, 64% predicted that the 'S' part of 'SME' will not be able to access funding through the government’s new credit easing efforts.

The remaining 36% believed they will benefit.

Confirmed in the Autumn Statement, the new scheme will see up to £40bn in loans underwrited by the government meaning that banks can offer them to business customers at a lower interest rates.

Commenting on the findings, Dan Martin, editor of BusinessZone.co.uk, said: "As the National Loan Guarantee Scheme applies to companies with a turnover of up to £50m, it’s perhaps not surprising that most entrepreneurs are sceptical about the benefits.

"Given the state of the economy and the fact that small businesses are crucial to its recovery, it’s vital that the measures that the government says are for the benefit of start-ups and small businesses really are for the benefit of start-ups and small businesses.

"Saying that you're going to open up £40bn of bank loans to companies makes for a good headline but it will mean nothing if the companies that need it most don’t get access." 

Good News for Angels and Small Businesses

The chancellor will announce today a £370m package aimed at encouraging small start-ups to grow while also helping small businesses.

A new seed enterprise scheme will aim to reward entrepreneurs and investors willing to take a risk on high-tech and innovative small businesses.

Those that can invest £100,000 in a company with fewe4r than 25 employees and assets less than £200,000 will receive 50% income tax relief on the value of their investment and a 1 year capital gains tax holiday the next year.

This Seed Enterprise Investment Scheme will cost the government £120m over the next 4 years.

With Banks not lending what alternative sources of funding are there?

This is the question that many SME’s are asking in ever increasing numbers. If the Banks will not lend to them who will? The answer is that there are many alternative sources of funding that many people are totally unaware of. There are even some products from main stream lenders that seem to be forgotten. Here are just a few examples, but remember these are ‘alternative’ sources and as such are more expensive than High Street lenders.

Single Invoice Discounting or Factoring: Many Managing Directors do not have the need for a full ledger, long term invoice discounting or factoring agreement from a main stream provider but from time to time they may have the need to use the services of a single or selective invoice discounter. They may need some extra funding to pay a VAT bill or corporation tax or to purchase stock for a big order. So if you are in that situation then the single invoice discounters are the answer. Use them only when you need them.

Enterprise Finance Guarantee Loans (EFG) These government backed loans are terribly difficult to get from a Bank, but they are not the only people that offer them. Some invoice discounters are also able to offer their clients this type of loan. They are much more enthusiastic about these loans than the Banks are. This is another reason why it is so important to take advice when choosing your invoice discounting or factoring provider. So many people chose the first one that approaches them without exploring what additional services some of them can offer such as EFG loans, Trade Finance and Stock Finance. Chose the wrong one and you may miss out further down the line.

Trade and Stock Finance: In the past if you required this type of funding they always had to come from your Bank or from an invoice discounter or factor. You had to take all services from the same provider. There are now Trade and Stock funders that only do Trade and Stock funding. You still have to use Invoice Discounting or Factoring but now you have a wide choice of providers that you can choose from.

Angel Funding: In the past Angels parted with their money for equity stakes in your company. Now there is an Angel Network that specialises in giving loans to companies so that you do not have to give up any of your hard earned equity.

Crowd Funding:  A new Angel Network has emerged where small individual investors can take small stakes in your company. This is an interesting concept for those start-ups companies with mass appeal, who cannot get funding from normal angel networks.

Credit/Debit Card Finance: Do your customers pay you by credit or debit card? Do you need to raise some funding to buy a new piece of equipment or to re-furbish your restaurant or salon? If so you may be able to borrow money on the strength of your future credit/debit card transactions.

The banks are not the only sources of funding out there. Look around for these alternative sources and contact an experienced adviser.

This Christmas help the Fredericks Foundation to fund unsupported loans to start-ups

The Fredericks Foundation, a registered charity, gives unsupported loans to disadvantaged entrepreneurs, who have been turned down by their banks for small loans. Loans range from £5000 to £10,000.

You can help raise money for the Fredericks Foundation by signing up for ‘Give As You Live’ By using this method of shopping thousands of shops will donate to Fredericks Foundation when you shop with them on line. An easy way to give at no cost to yourself.

Simply visit: www.fredericksfoundation.org/giveasyoulive

Businesslink launches two new services

Business Minister Mark Prisk has just launched Business Link’s two new online services as he marked the start of Global Entrepreneurship Week. He said:-

"The Business Link services unveiled today will give businesses new, easy to use, and tailored online services.

This represents the most effective and efficient way to provide the information and advice businesspeople tell us they need and will help businesses grow.

Interactive tools and services provide real benefits and support to start-ups and SMEs and I am looking forward to seeing these new services put to good use."

My New Business offers comprehensive information and guidance to those looking to start a business, including personalised checklists, video tutorials and step by step guides.

The Growth and Improvement Service offers access to informative videos, case studies, events and business support finders, for those who wish to develop their business.

Visit NOW at: www.businesslink.gov.uk/newservices

Government Announces New Funding for SME's

Hundreds of small businesses will benefit from government investment of £95 million to help boost growth and rebalance the economy, Prime Minister David Cameron announced today.

The funding is expected to create at least 4,000 jobs and unlock around £500 million of new investment by small and medium businesses (SMEs).

RBS, NatWest and HSBC have agreed to facilitate the distribution of the £95 million - which is part of the government’s Regional Growth Fund. RBS and NatWest will facilitate £70 million and HSBC will facilitate £25 million. The banks will not profit financially from the administration of these schemes.

Through these schemes small businesses, which are unable to secure commercial funding for their project, have the potential to benefit from government support through the banks’ regional networks in order to make their project commercially viable. The schemes announced today will provide grants to support SMEs considering investing in new capital assets and creating new employment.

Was Venturefest Bristol a success?

The answer is a resounding YES

Alan Cottle was invited to represent Pegasus Funding Resources as one of the specialists on the panel for “The Pitch” which was part of Venturefest Bristol held on 3 November.

Venturefest Bristol was held at the recently opened Bristol and Bath Science Park and the event was a huge success. Over 40 businesses exhibited in the innovation showcase and a sell out 700 delegates attended.

During “The Pitch” ideas were pitched to the specialist panel of investors, businesses advisors and an open audience of Venturefest participants. There were 25 “pitches” to the expert panel which ranged from a group of students with a good idea through start up companies to businesses already trading and looking for growth. The specialists panel members gave their feedback to the presenters of a fascinating array of business ideas, including alleviating bed sores, dental equipment, 3d 360 degree photography etc.

There was a great buzz in the exhibition hall where 68 stands accommodated the innovation showcase and the Business Support exhibition and there was plenty of networking going on between old contacts and delegates making new ones. The workshop sessions were well attended as entrepreneurs and experts shared their experience and knowledge

Pegasus Funding Resources look forward to being involved in Venturefest Bristol again next year and if you want to attend the event you will need to register early to avoid being turned away as happened to some this year!

For more details contact: alan.cottle@pegasusfunding.co.uk

www.pegasusfunding.co.uk

Why do so many British Companies ignore R & D Tax Credits?

The Government wants to give money back to British Companies that undertake research and development. Unfortunately many Managing Directors and Finance Directors and even their Accountants concentrate on the word ‘research’ and not on the word ‘development’ and so believe that this means that they will not qualify. In many cases this will not be true and so they are missing out on this very useful source of funding. If you are developing a new product or service, or making improvements to existing products and services you may very likely be eligible. Even software companies have been successful.

 The scheme is designed to encourage and reward innovation. It allows innovative companies to either recover Corporation Tax paid and or receive a rebate of the NIC/PAYE generated by the business. Most first time claimants are able to also submit a claim for the last two completed year ends.

The average claim in the first year is £40k

Britain has the lowest uptake of this scheme across Europe less than 8,000 SMEs claimed last year. But it is estimated by HMRC that there should be 150,000 companies applying in the UK.

 The reason why most companies do not apply is that they do not believe they do” R&D”.

Many see R&D as something done by men in white coats in a laboratory rather than the development of a product.

They also often look at the scheme on the HMRC site and are intimidated by the terms used and often their external accountants advise them not to claim.

80% of clients either looked at this scheme at some point and thought they did not have a claim.

Typically claimants should have the following characteristics:

·         The company must be a UK Limited company

·         The company must have paid either Corporation tax , NI & PAYE

·         For any project to be valid the company must have taken a financial risk.

·         Projects that have failed can also be included

·         Innovative projects

·         Projects undertaken that seek to be greener more efficient

·         The work of sub-contractors can be included.

What type of companies would meet the criteria?

·         Software companies

·         Technology companies

·         Broad based manufacturing

·         Anyone who is “innovative” and produces a product of some kind

So if you are developing a new product or service and can identify the costs involved, then you may be throwing money away by not investigating the likelihood of making a successful claim. This should not be based on the Financial Directors or your accountant’s opinion, but on the opinion of specialists in this field. You have nothing to lose and a lot to gain as most specialists work on a success fee only basis. So contact a specialist today and see you can get the Government to send you a cheque.