|
Money, Money,
Money
Whilst our Government has been pouring
taxpayers’ money into failing banks, these banks have not been
so keen to pass it on to the business community. So if you are
currently seeking finance, the following may offer you an
alternative route to gaining some funding:
Government Grants
Your local council will have a list of
grants available to businesses. They will not be for huge
amounts, normally from £500 to £1,000 but every little helps.
You may also find that you can apply for multiple grants.
Bear in mind that there are various factors
which will determine whether you are eligible for a grant.
Firstly, location will play an important role. If you are in a
regeneration area, for example East London, which is currently
being developed for the Olympics, you may find there is more
money set aside by the councils to assist start up businesses.
This finance is normally limited to start up businesses and not
available for established companies.
Secondly the grants available are determined
by sector – privileged sectors in London include hospitality and
tourism and restaurants. The local council will also look
carefully at the number of competitors in the area you wish to
start up, so before applying for a grant you need to prepare
that all important business plan to see if the local market will
support your new coffee shop. (“How to set up a Coffee Shop”
includes a business plan template that will guide you through
writing your plan).
Community Development Finance Initiatives
(CDFI)
Never heard of CDFI?s Well, there are over
60 of these organisations in the UK which provide various forms
of loans and support to businesses, and they are designed to
assist viable businesses with funding. For further information
have a look at their website:
Community Development Finance Association
To harp back to London again, you will find
details of one such fund:
the Mayor’s Economic Recovery Loan Fund, which provides sums
of between £10,000 and £50,000 to businesses which have been
trading for at least 12 months. An example of a successful
application by a business in the catering industry can be viewed
here:
http://www.lda.gov.uk/server.php?show=ConWebDoc.3376
The major advantage of borrowing through the
CDFI’s is that they don’t take in to account your credit
history. A decision will be made on a case by case basis and
all sizes of businesses are given the opportunity to apply for
funding.
If you are still in the flush of youth, you
might wish to apply to the The Prince’s Trust
The Prince’s Trust is open to 18 to 30-year olds and will
provide funding of up to £4,000 (or £5,000 for partnerships),
along with support for your business idea. However, the usual
amount awarded is £2,500. Interest on the loan is 3% with
repayment not due within the first 6 months, and repayable over
5 years.
The Carbon Trust
If you approach your coffee shop from the
“Green” perspective, not only can you save on your fuel bills,
you also have the opportunity to apply for funding at 0% on
loans of between £3,000 to £400,000 with
The Carbon Trust. There’s no arrangement fee and loans are
repayable over a four-year period. For more information visit
The Carbon Trust website.
How to Finance Your Business
By
Jessica Balkwill, Financial Advisor
In the current climate it is
difficult for an aspiring business owner to know were to go for
the necessary credit to start up their dream. This article will
hopefully provide some information to help you make decisions,
and an overview of the availability of credit as it currently
stands.
When looking at raising money to
start a business, or expand an existing one there are two main
avenue of credit that can be considered - business and
personal.
Business finance is normally
available from your high street banks in the form of a
commercial loan, overdraft facility or business banking. This
has been the traditional route for most start up businesses
using this finance to supplement their own deposits to achieve
the total amount of funding required. This traditional route is
harder to access now than in previous years, with lending to
businesses down across all sectors. This means that only the
strongest cases are being offered credit. As a start up business
this route will most likely be challenging. Success will depend
on a strong case for lending and working closely with your
accountant to present a good business plan. Whilst lending to
businesses is still subdued, anecdotally there seems to be some
optimism in commercial lending and a modest, renewed appetite.
The second common route for securing
financing is to look at most people’s main asset, their home.
Whilst many businesses like to keep their home and their
businesses finances separate, in this climate it may be worth
while considering using some of your home’s equity to acquire
the business. Mortgage lending is not without its problems and
the amount of available credit is lower than it has been for
some time. However, since the beginning of this year we have
seen gross lending for purchases increase steadily and the
market show some signs of stabilisation. In my own business, I
have seen fewer properties down valuing, and some even exceeding
the client’s expected valuation. Lenders seem more pragmatic
than they have been in the last two years and there are some
competitive rates. The beauty of raising equity via a remortgage
is that the case for the increase in funds comes down to the
amount of equity in your property, your credit profile and your
current earnings. It is a less vigorous assessment than
commercial lending. Loan to values (LTV) are available on
remortgages up to 85% and occasionally higher, which is far
higher than commercial lending which is currently between 50-75%
LTV. There are also different structures available to commercial
borrowing which could be useful for small businesses. One of the
most interesting structures is a flexible or offset mortgage.
This product works by only charging you interest on the amount
of money you are currently borrowing. For example, if you had a
facility of £200,000 and had only used £100,000 of it, you would
still have access to the £100,000, but would only be paying
interest on the £100,000 you had currently borrowed. The product
comes with an associated savings account which can also be
offset against the outstanding mortgage balance. The best way to
work out which route will be best for you is to talk to people
and find out as much as you can. Speak to a mortgage broker for
their advice, talk to your accountant and ask how they see the
economy at the moment and what their other customers are
experiencing.
The bank of England strongly hinted
that interest rates would remain low for the next 12 months and
possibly even longer in their August MPC minutes. This is an
encouraging sign as it will help to support stability whilst our
economy and housing market recover and start to move out of
recession. We appear to be on the right track and doing the
right things, but the recovery will take some time. Stability is
the key for the moment and the housing market at least seems to
be benefitting from it. If you have any questions, or wish to
discuss your plans with me please contact me directly.
(Jessica's contact details are
available in the September 2009 Newsletter.)
Back
to Home Page
|
