Tag Archives: business finance

Using Factoring To Raise Money For Your Business (Guest Post)

FactoringIt can often be difficult for new or start-up businesses to raise finances. Lenders are wary of providing financial support to companies that don’t have a proven track record, whose business models depend on just a few large accounts, or who require investment in order to grow and increase their profit margin.

Another problem that new businesses face is the day-to-day admin side of things. Even if you’re an expert in your field you may not be experienced in setting up invoicing and PAYE – these back office processes are necessary for your business but can prove a stumbling block if you’ve never dealt with them before.

The Solution

One solution to both of these issues comes in the form of invoice factoring, also known as invoice financing. With factoring, you raise cash against your invoices. Normally, when you raise an invoice you’d have to wait 30, 60 or even 90 days for it to be paid. With factoring, you can borrow up to 90% of the invoice’s value in as little as 24 hours. This improves your cash flow, giving you an instant injection of capital when you need it most.

The factor doesn’t just lend you money, they can help out with your business admin too. It is common for factor to take over their client’s sales ledgers, meaning that they control your payment collection. They will contact your clients directly for payment, so you may not need a dedicated accounts department to handle this for you.

Some companies prefer not to disclose that they use a factoring service, in which case invoice discounting is also available. This works on the same principle as invoice factoring, only you retain full control of your sales ledger and take care of your own payment collection.

In both cases, once the factor has been paid in full this means your loan has been paid off without you having to hand back any cash.

Where’s the catch?

Of course, because you’re borrowing money there is a fee to pay. Factors will charge a percentage of the invoice value, so you don’t receive the full amount of your invoice. This may decrease your profit margin, but it’s often a small price to pay to improve your cash flow and get access to expert business advice. You don’t have to pay a fee before you’re lent any cash – the money you receive will be the invoice amount, less the factor’s fee.

Am I Eligible?

Factors generally require that you are a low-risk investment with a good trading history. This can mean that you don’t rely on one or two big clients for your business, but spread the risk among several. You may also need to have reliable clients who tend to pay their invoices on time rather than disputing them.

Some factoring companies actually specialise in lending to start-ups, or businesses that use unusual payment and invoicing periods such as recruitment companies. To find the best factoring company for you, get in touch with a factoring broker. They have relationships with both banks and independent lenders and will be able to advise you further.

This article was written by Kedisha from Touch Financial, the factoring specialists.

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10 Things to Consider Before Company Formation


Starting your own limited company is both exciting and daunting. You need to consider many things before you even think about company formation. Below is a list of 10 things you ought to consider.

1. Money, Money, Money! As we discussed before it’s a common Company Formation Myth – You’ll Get Rich Quick. Starting a limited company is not a quick route to a large pot of gold, it takes hard work and dedication. It’s therefore really important to be passionate about your business. Don’t just start a business for the money or you’ll soon find yourself struggling with a business you don’t care about.

2. Do what you know – See point 1 – how can you be passionate about something you know nothing about? If you know what you’re doing and you’re passionate about it this will shine through and your customers will know it. The best businesses are run by people who are “experts” in their area and really care.

3. Don’t be afraid to specialise – remember the old phrase “jack of all trades, master of none” – if you specialise, you’ll be able to provide the best possible service for your customers and will gain a reputation for doing so. Combined with knowledge and passion, specialisation can lead to a truly superior business that people are happy to recommend to their friends, families and even perfect strangers!

4. Mixing business and pleasure. NEVER. You’ve heard it before, but often people go into business with their friends or family and end up falling out with serious consequences for their business, their relationships or both. Mixing business and please is never a good plan.

5. Getting a fresh perspective – despite point 4, there’s no harm in asking others for help. You might get complacent and over confident or be unsure of yourself. Support from friends and family might shed a fresh perspective or light on your situation. Whether it’s your initial business plans or your ongoing business activities in the future. This can be especially relevant if your friends or family are in the demographic or target market you are aiming for.

6. Finance – there may be more routes open to you than you might think. Completing a company formation to start a limited company may lead to many routes of finance. Often banks are more willing to lend to limited companies than other kinds of business. There are many options for finance for your business. Take a look at our business finance database for help finding finance and investment for your business.

7. Don’t forget to make a plan – it might be cliché, but having a business plan is an important part of starting a limited company as much as any other business. We recommend formulating a plan before even thinking about company formation.

8. Time – building a successful business takes time. Don’t expect to turn your idea into a success over night. It takes time to get noticed, build a customer base and start turning a healthy profit. Don’t be disheartened if things don’t go perfectly from the off.

9. Know your stuff! – In business, just like in everything else, ignorance of the law is no excuse. Be sure to do your research before you get started so you don’t get caught out with nasty fines or worse – criminal prosecution. Failure to do the right things could even lead to your company being struck from the register!

10. Know your market – Before carrying out a company formation to start your own limited company, we’d recommend undertaking detailed market research. Just because you think something is great, doesn’t mean other people will. You need to know your market, who you’re selling to, how much they’re willing to pay and how best to get their attention. Market research will help you get the most out of your business idea.

Related Reading:

Growing Financial Support For Small Business? – The Business Finance Taskforce

Business Finance Taskforce

The Government are keen to claw the economy out of the current recession. As a result, more and more measures and schemes are being developed to help new businesses and SMEs to survive and grow. After the Government bailed out the major banks when they were in financial difficulties, they made it clear that they would be expected to lend money and offer support to SMEs.

Recently the Business Finance Taskforce published a report detailing proposed “actions designed to help business thrive and grow”. This report includes 17 specific actions which can be seen on the British Bankers’ Association’s website and are aimed at things like improving relations, easing access to funding and providing better information to customers.

The most significant actions are the new £1.5 billion Business Growth Fund and the Enterprise Finance Guarantee Scheme.

£1.5 billion Business Growth Fund

A proposal has been put in place to develop a fund of around £1.5 billion (over the next few years) to provide finance and investment for viable businesses and SMEs. As the name implies, the Business Growth Fund is intended to support established businesses that are looking to grow rather than newly formed limited companies or small businesses.

The fund is apparently aimed at supplying funding between £10million and £100million to those viable businesses seeking this sort of investment in order to grow. Of course, the numbers will be limited and the businesses that actually need financial support, i.e. those in their first years of trading, will probably miss out.

The aim is to have the fund up and running by April next year. Yet, some feel that the proposed £1.5billion fund is not enough.

Enterprise Finance Guarantee Scheme

The Business Finance Taskforce also proposed continued support for the Enterprise Finance Guarantee Scheme, which is intended to provide guaranteed funding for small business through loans and overdraft consolidation. Supplied by a number of leading banks this scheme allows eligible businesses to borrow anywhere from £1,000 to £1million where they might not otherwise have been able to.

The combination of these two actions and the further proposals listed by the Business Finance Taskforce should be enough to offer extra support to new business and growing SMEs.

If you’re unsure about the business finance available to you, why not let us help you by using our Business Finance Database search service. Only 60 seconds of your time to find the perfect financial support for your business or limited company.

Further reading:

Business Finance – Developing Your Management

Company Formation Costs

You’ve started a new business or you’re growing your limited company and you need financial support to spread your wings. But where do you turn?

Many people aren’t aware of the number of different paths to finance and support available to their business. For example, did you know you can get around £1,000 toward the training and development of managers and directors?

Training Your Managers/Directors

If your company has over 5 employees but less that 249 then it may be eligible for support with the training of managers and directors. £1,000 worth of training support could be used by your business to help train potential senior managers and directors in a variety of areas including:

  • Formal qualifications
  • Guided tuition
  • 1:1 coaching
  • And more!

Getting Financial Support For Your Business

Finding financial support for your business can be difficult, yet something as valuable as this training fund shouldn’t be missed. If you’re unsure of what finance and support is available, search our business finance database and we’ll help you find the best support for your business. Fill out a simple form and we’ll do the rest.

Risky Ideas For a New Business


There are certain things you shouldn’t do when you’ve started a new business or registered a limited company. Starting your own business is inherently risky, but careful planning and sensible business practice will keep you out of danger. The advantages of a limited liability company make it the most appealing business model because of the protection offered by limited liability, but that protection is not absolute and it will not prevent your company going into insolvency.

I covered some of these point in my articles on company formation and business start-up myths, but it is worth reiterating them here.

Starting Business Without a Plan

One of the most dangerous ideas for a new business is getting started without a plan.

“My idea is brilliant, I don’t need a business plan.” Is the cry of the gun-ho entrepreneur.

Every business needs a plan. A business plan is a vital tool for many reasons. Firstly and perhaps most importantly, a well put together plan can help a business acquire the finance necessary to get started. A plan will also help you keep track of how much investment you need and what you are going to spend it on. Over time, a business plan will help you keep track of how your business is running, whether you’ve reached your goals or not and what changes you need to make going into the future. Without a plan, you might not know where you’re going wrong or how to correct for it.

Lying To Yourself

Another pitfall of starting a small business or limited company is lying to yourself. Many businessmen and women, fool themselves into believing they will be more successful. Exaggerating projected sales and profits and underestimating overheads. Including such errors in your plans could lead to problems in the long terms. Investors and other people reading your business plan are likely to be more realistic with regards to your figures.

Assuming There Is No Competition

Making an assumptions about the competition is a very dangerous game when it comes to starting a new business. Failing to do the necessary market research and convincing yourself that there is no competition or that the competition that exists are no threat is a very dangerous business idea. You will soon find your business struggling as you battle to compete with other businesses in the market. On the other hand, analysing the competition can make all the difference to your business. You can learn from their success and failures and possibly even spot a niche in the market that you have failed to notice before.

Experience Isn’t Necessary

Diving head first into a business you know nothing about is never a good idea. Starting a business, you’d be advised to have some experience of the relevant industry. If you plan to start your own restaurant, it might be a good idea to at least try working as a waiter or chef for some experience of what it might be like, rather than going in completely blind. You can do all the research you like, but nothing can replace good, solid experience. Plenty of new business owners have succeeded without experience, but those with some experience are generally more successful.

A Business Cannot Survive Without External Investment

This is another idea you should get out of your head. Plenty of people have started their own business with personal funds and no need for external investment. Although investment from outside the business might be useful, it is not necessarily true that your business will not survive without it. Similarly, many believe that investment from a venture capitalist or business angel means success and survival of their business is guaranteed. Again, this is a falsehood. Without proper management, these businesses are just as likely to fail. The only advantage is the experience and input of the venture capitalist.

Careful Planning and The Path To Success

If you’re thinking of starting a new business or carrying out a company formation, then we’re here to help. Hopefully you’ve found the advice in this blog article helpful, there is plenty more if look around. We also offer a number of services to help get you started, including a business finance database and a business plan wizard. Get started with your new business today, with a little help from the UK’s leading company formation and business registration agent.

Minimum Wage Rates Increase For UK Businesses

uk-minimum-wage-2010Back in July this year, the Government announced that the National Minimum Wage Rates (Were) Set To Rise 2%. Now we’ve reached the set deadline and the proposed changes are taking place.

The national minimum wage has risen to:

  • £5.93 an hour for people aged 21 and over
  • £3.57 an hour for 16 and 17 year olds
  • £4.92 an hour for 18 to 20 year olds; and
  • £2.50 an hour for apprentices under 19.

(The original national minimum wage rates (and information on other statutory rates of pay) can be seen in our previous article “Minimum Wage and Statutory Pay Schemes”)

Potential Impact On Small Businesses

Of course the younger members of the working community will only be too pleased with the increase in their potential pay packet. But with the current state of the economy, the increase might mean difficulties for small business.

The British Retail Consortium in particular, is worried that if this trend continues into 2011, with another raise in the national minimum wage, then it could “seriously impeded retailers’ ability to maintain and create jobs”. (see “MINIMUM WAGE RESTRAINT NEEDED TO PROTECT JOBS”)

Higher rates of pay, even minimum wage, will mean higher operating costs for small businesses. This in turn might mean job cuts or at least reduction in potential new positions in the job market. The retail sector won’t be the only industry effected and new limited companies and small businesses employing staff will have to give serious consideration to their operating costs.

If you wish to find ways to keep costs down and run a tax-efficient limited company, why not get in touch with the UK’s leading Company Formation agent and see how we can help you get the most out of your business funds.

Banks Still Not Lending To Small Business

Banks-lending-to-SMEWith the current state of the economy, we’re all tightening our belts and trying to get through. This attitude apparently includes the big banks who really should be making every effort to support small business and new start-ups after the tax-payers were forced to bail them out of trouble in recent months.

The current news trends show that the opposite is true. Although the big banks defend themselves saying they are lending more, they have failed to reach the targets set by the previous chancellor Alistair Darling. The Forum of Private Business has an interesting insight into the current lending situation in their article – “Never Mind Not Lending Money to SMEs – the Banks Aren’t Even Lending Them Their Ears!

Similarly British SME has an article about a rise in the number of complaints being made against the banks by small businesses to the Financial Ombudsman – “Bank loan complaints more than double”. The facts clearly show that the banks aren’t doing what they should to support small business within the UK. Which perhaps isn’t the best idea in the long-term when you consider that it is the businesses who will help bring the country out of the recession and bring the banks back into profit.

Business Start-Up Myth – It’s hard to get a bank loan

business-start-up-financeAnother business myth that often rears his head is to do with business start-up finance. People say it’s hard to get a bank loan to start a business. This myth is reinforced by recent research carried out by the IoD which suggests that 60% of directors have been rejected by banks when seeking finance yet clearly this is not always the case. Many people rejected by bank lenders have no form of guarantee or little equity. Shoddy business plans might well be to blame also.

With the current state of the economic climate, the new coalition Government are keen to encourage the banking sector to lend more freely to SMEs and business start-ups. Pressure is mounting to give financial support to the small businesses in the UK which are the life blood of the economy.

Bank loans for business start-ups

Getting a bank loan for a new business start-up might not be a difficult as you imagine. With a well drawn up business plan and the proper company documents, as well as some form of equity, banks will be far more willing to lend to new businesses. More often than not, new limited companies find it far easier to gain finance than any other form of business as lenders are far more willing to invest in this legal structure. Consider carrying out a company formation to start your new business to make the most of this and other advantages of limited companies.

Finance alternatives

New businesses should bear in mind that bank loans are not the only avenue for business finance. There are plenty of alternatives, some easier and some harder ways to acquire finance, each with its own merits. Take a look at our previous article “Top 10 ways to fund your new business” for more information. Government grants, factoring and regional growth funds are just a few examples. If you are willing to let others get involved in your new business, you may also want to think about venture capitalists and business angels.

Late Paying Businesses and The Solution – Factoring

Research carried out by the Forum of Private Business has shown that small firms are currently feeling the pressure as more and more other businesses are late with their payments. Larger companies in particular are guilty of making struggling SMEs wait for payment of their invoices.

Dell is cited as an example after increasing its payment days from 50 to 65, potentially leaving their suppliers waiting another 15 days for payment of their bills. These sorts of delayed payments can have potentially serious effects on small and growing businesses, which may well be struggling to survive in their first few years. Late payment necessarily leads to less available finance for the running of the business, investing in future plans or any other business activities.

With the current state of the economy, life or death of a business may well hang in the balance. Late payments could be the tipping point.

There are solutions out there. As I previously discussed in another article, Factoring is an option available to those companies who need finance quickly.

“(Factoring) is a financial transaction where a company sells its invoices to another business at a discount. This other business (a factoring company) then seeks payment of these invoices from the debtor. Factoring allows swift acquisition of finance which can be used to fund business growth. The obvious downside being the loss of value of the initial invoice.”

Factoring allows the business to quickly recover its invoice payment and thus the finance it needs in the short term. It may be a necessary alternative to waiting for payment or trying to counter the delayed payment by doing the same and risking damaging the businesses reputation.

During the factoring process, the rights associated with the invoice are passed to the factoring company, as well as any risks that go with it.

Factoring isn’t always ideal, but it may be preferable to the alternative. The factoring company may only be willing to take on the debt if the debtor is sufficiently credit worthy. This clearly wouldn’t be an issue when dealing with a large company such as Dell, but for small business activities it might be a consideration.

At The Company Warehouse, we know the importance of finance for small business, which is why we are expanding our services to include finance guidance and use of a financial database to help find the money you need to get your business started and keep it running. Register for access to My Company Warehouse to gain access to this and other business services.

Reference – Computer giant Dell entered into late payment Hall of Shame

60% of Directors Rejected By Banks When Seeking Finance

A recent research study carried out by the Institute of Directors (IoD) has shown that around 60% of company directors have been turned down when seeking finance for their business. Business banks have been turning Directors away and forcing them to find other means to fund their endeavours, including maxing out their credit cards.

Clearly such problems with finance have knock-on effects for small and growing businesses, leading to stunted growth and perhaps even total failure. With the importance of SME’s to the growth of the economy recognised by the Government and efforts made in the last budget to increase lending to small businesses it leads to a confusing message. The key point is, without finance businesses cannot grow and without growth the economy will suffer more, falling further into debt.

The importance of having an experienced finance director and accurate reports and financial plans cannot be underestimated. Factors such as these can make the difference when seeking funding from banks and other investors.

As a small business or new limited company, it is important to remember that there are more avenues of finance available. Take a look at our previous article Business Finance – Top 10 ways to fund your new business for more possibilities.

Hopefully in the future, with the added pressure applied to British Banks, small businesses will find getting loans a little less taxing.

For more information see the Institute of Directors website or follow the IoD on Twitter.