Tag Archive | "investment"

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.

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Image: Autumn leaves at the top of the weir by Steve-h

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Would accountants for contractors benefit from lower corporation tax?

The CBI believes the government needs to reduce corporation tax further than its intended level of 24% if the UK is going to remain competitive.

John Cridland, the director general of the business group, said that tax reform should improve competitiveness and make the UK a more attractive place for investors. Lowering the corporate tax rate will go some way towards encouraging organisations to base their operations in this country but the government also needs to address the tax burden which is making the overall system uncompetitive. Furthermore, the 50% higher income tax rate is seen as a barrier to attracting much needed talent to the UK.

The CBI also has concerns about the proposals for taxing foreign companies that are owned by UK businesses. The anti avoidance measures that have been included in the proposed controlled foreign companies regulations make the regime cumbersome, it says.

Foreign companies perceive HMRC as very aggressive when it comes to CFCs and whilst it is important to keep the UK tax base, any anti-avoidance measures have to be proportionate to risk and aimed at specific abuse. Investment could be deterred if measures are perceived to be too heavy-handed.

The CBI does support the Patent Box to complement the current Research and Development Tax Credit scheme but believes that more thinking is required to make the UK more competitive. The government should also implement measures to incentivise intellectual property development after the research stage but before the patentable product creation stage.

Cridland’s comments were made as part of the Confederation’s submission to the Corporate Tax Reform government consultation.

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

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Don’t rely on your home to fund your retirement

The government wants to see the housing market depressed in order to make it easier for first time buyers to buy a property.

Experts have already predicted that house prices will fall this year by between 6% and 10% and homeowners are being warned that they should not expect to fund their retirement by releasing home equity.

Councils and property developers will be encouraged to construct more homes, which will depress the market and help first-time buyers.

On Monday, Grant Shapps, the housing minister, said that property should be regarded as somewhere to live rather than an investment. He wants to see a rational housing market where property prices rose by less than salaries. If property values were to fall in real terms this would benefit the millions of young people who are currently unable to afford to buy, he added.

Shapps pointed out that it was crazy for housing to be so unaffordable and that past scenarios whereby house prices boomed over a short period of time was unhelpful.

This may seem hypocritical coming from a man who is thought of as an astute property speculator. He profited by £250,000 on one property deal and his current five-bedroomed home would realise over £1 million if sold.

Whilst it might benefit first-time buyers to have a rational housing market, homeowners who were relying on home equity to fund their retirement will not welcome the move. They have already seen their pension funds severely eroded by the economic crisis.

Homeowners now have to remain in their properties for longer than ever, according to new figures from the CML. They now spend nearly double the length of time in their current home before putting it up for sale compared to the beginning of the recession. In 2007, people stayed about 11 years in a property; now it is 21.5 years.

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Image: Bird Houses / 20071230.10D.46705 / SML by See-ming Lee ??? SML

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Don’t spy on your staff, talk to them instead!

Owners of SMEs should talk to their employees about ways of reducing costs rather than spying on them, new research findings suggest.

Iris, a software solutions provider, conducted research which showed that business owners are increasingly scrutinising the timesheets of their employees as well as expense claims and purchasing decisions.

The TUC, however is arguing that this is not the way to reduce overheads and urges managers to talk to their staff about money-saving matters.

TUC policy officer, Paul Sellers, claims that employers who snoop generate resentment which results in lower productivity. Employees can often have good money saving ideas and therefore the best approach would be to involve them in cost cutting exercises, either through the union or a workplace representative.

Meanwhile, big businesses are missing out on potentially large savings by not investing in energy efficiency. The Carbon Trust Advisory claims that companies could save £1.6bn easily by simply upgrading their existing systems and training staff on ways to save energy.

The Trust published a paper earlier this month entitled The Business of Energy Efficiency which showed that finance directors estimate the internal rate of return on energy efficiency investments is less than 20%. In fact the average is actually 48% and investments start to pay back within 3 years.

Hugh Jones, the MD of the Carbon Trust Advisory, said their research showed that large companies are wasting billions every year on unnecessary energy use because they ignore many of the investment opportunities.

Energy efficiency appears to be a low priority in many businesses and a more convincing case needs to be made in order for these organisations to access the capital, resources and expertise required for implementation and staff training.

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

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Will contractor accountants soon be helping more start ups?

The work and pensions secretary, Iain Duncan Smith, plans to help Britons long-term unemployed start up their own business.

Smith told the Conservative Party conference that financial backing and support would be available to people who have been out of work for over 6 months.

Up to £2,000 in financial support would be made available through the New Enterprise Allowance and the government would arrange mentoring to help new entrants and contractors to the business world.

The government hopes to create 10,000 new small businesses and limited companies through this initiative and is part of a radical shake up of the entire welfare system.

Included in the proposals is a move that will see benefits streamlined so that recipients receive just a single payment.

It is believed that the high street banks will shortly announce a new fund dedicated to lending to SMEs. Although details are yet to be finalised, each institution would be injecting tens of millions of pounds into the fund. And to give small businesses a better chance of having their loan approved, a mentoring programme to advise on their capital structure will also be set up.

Any move to encourage the banks to lend more will no doubt be greatly appreciated by SMEs. A new report shows that 18% of small business owners are turning to alternative funding sources in order to stay afloat. 10% of business owners have turned to family and friends, 7% are using their credit cards for business finance and 7% have turned to loan companies for help.

One third of SMEs have had to make cuts in the workplace with 47% reducing their use of utilities, 38% cutting expenditure on staff refreshments and the same percentage cutting back on travel expenses.

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