Tag Archive | "funding"

How many contractor accountants went into liquidation in final quarter of 2011?


The latest company liquidation figures published by the Insolvency Service have been released.

The fourth quarter of 2011 saw a 14% increase in the number of compulsory company liquidations. 4,260 companies went into liquidation in the final quarter; 1,389 of those were compulsory. 191 companies took advantage of voluntary arrangements, 234 called in the receivers and 658 went into administration. Creditors voluntary liquidations stood at 2,871 – a quarter on quarter decrease of 5.1%, but an increase of 3.4% on the comparable quarter of 2010.

Frances Coulson, the president of R3, said time to pay arrangements from the Revenue and low interest rates have created zombie companies that are just managing to keep their heads above water. Some of these companies will eventually sink, she predicted.

She went on to say that current insolvency figures are down on previous recessions and the latest data could represent the “calm before the storm”. In order for an economic recovery to take place, some businesses must fail so that viable ones can thrive.

R3 research shows that 29% of SMEs are experiencing decreased sales volumes and will need additional support this year.

Andrew Dixon from Bibby Financial Services blamed the increase in insolvencies on the lack of available funding. Less than 33% of small business applied for funding from external sources last year, and only 4% took advantage of government run initiatives such as the Enterprise Finance Guarantee of the Business Growth Fund.

He said the latest insolvency figures show that small businesses need more effective support. Businesses are now turning to asset based funding such as invoice finance in a bid to improve their cashflow, because they do not know where else to turn.

He added that government agencies and the financial services industry should work together to develop greater awareness of the funding options available to UK businesses.

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Contractor accountants told global economy is in a bad state


Trevor Williams, the corporate chief economist for Lloyds TSB, recently took the stage at the Meet the Experts conference to tell contractor accountants that the global economy is in a bad state.

Of course, this news will come as no surprise to anyone; we know the world is struggling to recover from the 2008 credit crisis, and in fact problems in the Eurozone are increasing the risk of a double-dip.

Williams told accountants they must pay close attention to funding costs and liquidity trends and keep an eye on default rates if they are thinking about applying for credit.

He went on to say that the probability of Greece defaulting on their debts in the coming few years is more than 100%. Surprisingly, he felt the probability of an Italian default was just over 5%, and for Ireland about 10%.

In the wake of all this worldwide doom and gloom, the CBI has cut its growth predictions for the UK economy. Previously the business organisation predicted growth of 1.3% this year and 2.2% next. These figures have been lowered to 0.9% and 1.2% respectively. The CBI also expects unemployment to rise to 8.5% next year.

On the positive side, the UK is expected to narrowly avoid dropping back into recession this winter but the government must continue with its spending cuts if we are to protect our AAA credit rating. The CBI also pointed out that if mainland Europe goes into recession, UK exports would be badly hit.

Finally, the CBI agrees with the Bank of England’s prediction that inflation will start to ease next year and by 2013 it will have dropped to the Bank’s 2% target rate.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Slight increase in SME funding but it’s still not enough


The SME community is still having problems raising funding and at the same time has to cope with increased costs, Adam Tyler, the chief executive of the National Association of Commercial Finance Brokers, said recently.

The latest survey from the NACFB shows that although funding has improved slightly, it is still very difficult for SMEs, including accountants for contractors looking to grow, to access. Funding is now coming in a variety of different ways and from a wider range of lenders, he said.

In the past twelve months, there has been a 3.5% increase in asset finance and a rise of slightly over 6% in commercial and sme mortgages. But short-term lending shot up by a massive 180% over the past year. Asset finance brokers have been struggling to find funders, but more smaller lessors have entered the market.

The number of companies using invoice finance increased for the fourth year in succession and this shows that businesses are looking for more cost effective ways of borrowing. Although 90% of small firms bank with the four major high street names, they are looking to alternative sources when it comes to borrowing.

Members of the NACFB have access to nearly 70 providers of business finance, Tyler explained. Companies do want to grow and they do want to borrow and yet a recent survey shows that only 16% of SMEs have asked their banks for funding, and of those, one third were refused.

David Connell from the Cambridge Judge Business School says that the government treats small businesses as an afterthought when allocating innovation funding and it should adopt a similar system to the US where projects receive 100% funding.

He explained that the 50% of costs allocation given to small firms isn’t appropriate as they are cash poor and lacking in venture capital.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Would local lending decisions benefit growing contractor accountants?


Following the news last week that the big banks could miss the SME lending targets agree by Project Merlin, the Forum of Private Businesses called for better competition, local bank managers to have lending powers and more investment in regional branches.

The chief executive of the FPB, Phil Orford, said the Forum wants banks to invest and regional services and give local bank managers the power to make lending decisions as they are best placed to understand individual local companies, which could include accountants for contractors. The current over-centralised, tick box mentality must go, he added.

The Project Merlin banks released a joint statement claiming that demand for small business funding has declined. However, the latest survey of small businesses from the Department of Business, Innovation and Skills discovered that over a quarter of SMEs looked for finance last year and just over half of them had difficulties getting funding from the first institution they went to.

Orford went on to say that regardless of the banks’ comments, there is still a pressing need for affordable funding. The main problem is that mainstream lenders are increasingly alienating small businesses. The big banks dominate and this has led to a lack of competition. Although there are a few innovative funding platforms, they are struggling to break into the market.

HSBC has said it is willing to welcome firms with viable propositions. In fact HSBC’s head of small business banking, Huw Morgan, said the bank would like to see more companies asking for funding.

He went on to say that businesses are now feeling more positive about their ability to grow. A lot of firms are scrutinising their customer base to see how they can expand by entering new markets and offering more.

Morgan finished off by saying that the bank will fund firms that have done their research and have a clear business strategy.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Online accountants in for a rocky ride


Contractor accountants should take note that the CBI warned recently that although the economy has been showing signs of improvement, challenges and uncertainty still lie ahead.

The comment came after the Bank of England decided to maintain the historically low interest rates at 0.5% last week.

The head of economic analysis at the CBI, Lai Wah Co, said that although the move was widely expected, there is growing disparity amongst members of the Monetary Policy Committee over the strength of the economic recovery.

GDP has increased by 1.1% in the past three months according to government figures but this is expected to slow down during the second half of 2010. The recovery is being supported by an exceptionally loose monetary policy and it may be sensible to move towards gradually withdrawing this monetary stimulus, the CBI expert remarked.

Meanwhile, the majority of the UK’s small businesses and limited company contractors have still not returned to pre-recession levels of profitability. 70% of British entrepreneurs have not seen their profits return to normal after the credit crisis, according to RSM Tenon’s Business Barometer.

9% of entrepreneurs believe they will have to wait for at least another 3 years before their business returns to normal, 20% think between 2 and 3 years and 27% say 1 to 2 years.

Over 40% of entrepreneurs have had to review their business through fears of a double dip recession and 22% think that a lack of cash flow could seriously threaten their operation in the coming 12 months.

The head of recovery at RSM Tenon said that they are expecting to see corporate insolvency levels remaining the same as over the past two years as business owners still struggle to secure additional funding.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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