Archive for April, 2021

Beware trading into insolvency

Thursday, April 29th, 2021

The present pandemic has created just the right conditions for certain businesses to trade their way into insolvency.

As we start the gradual withdrawal from lockdown, consumers will be on the lookout to spend after months of enforced home “arrest”. This will likely fuel an increase in economic activity on an unprecedented scale as we bounce-back towards pre-pandemic levels.

But isn’t this good news?

Under normal circumstances, yes, this is great news, but unfortunately, many businesses have needed to spend reserves and borrow in order to survive the last fifteen months of COVID disruption. They are standing on the starting line for a marathon, wearing slippers; unprepared financially for what is about to unwind.

Does your business fit into this category?

  • Cash reserves are limited
  • Losses have stripped away accumulated profits
  • You are obliged to offer better terms of trade to your customers than you receive from your suppliers. i.e., you sell goods on say 60-days credit terms but pay your suppliers for raw materials cash on delivery.

But why does this matter if sales are profitable?

When you sell goods on credit – 60-days in our example – for those 60 days you will have to pay suppliers and other overheads, wages, rent and other costs, before cash arrives in your bank account for sales made almost two months ago.

Ironically, the more successful you are in creating new sales, the more damaging this funding crisis potentially becomes. In accounting speak, you will be over-trading.

Planning is critical

If your business fits the description we have outlined above it is imperative that you plan your business growth. It may still be possible to manage higher sales as long as you organise cash-flow support to fund costs until higher sales, and therefore retained profits, provide you with the resources to self-sustain future growth.

No business owner should have to suffer the financial tragedy of over-trading through lack of planning. Pick up the phone, we can help.

New build your own home funding

Tuesday, April 27th, 2021

Considering a home build? It would seem that government is keen to support this activity as they have just announced new plans to provide over £150 million in new government funding. This is aimed to make it easier and more affordable for people to build their own homes.

The ‘Help to Build’ scheme will ensure that self and custom home building can become a realistic option to get onto the housing ladder through lower deposit mortgages.

Lowering the required deposit will free up capital, so people can build the home that they want and need whether it’s a commissioned, made to order home, or a new design from scratch. The scheme will provide an equity loan on the completed home, similar to the Help to Buy scheme.

Made to order homes allow people to customise the home they want based on existing designs. This could include more office space, or a particular design to support a family’s requirements including for disabled or older people.

Self and custom build could deliver 30-40,000 new homes a year: a significant contribution to the country’s housebuilding ambitions.

The scheme is part of the government’s wider Plan for Jobs as the new plans will also benefit small building firms. SME builders account for 1 in 10 new homes and the scheme will help scale up the number of self and custom build homes built every year.

This follows the news that major lenders have signed up to the government’s new 95% mortgage guarantee scheme to help more people than ever on to the housing ladder. Lloyds, Santander, Barclays, HSBC and Natwest are launching mortgages under the scheme with Virgin Money following next month.

Super Deduction….exciting tax break

Friday, April 23rd, 2021

Dear All,

We have posted a note on the exciting new 130% tax deduction for companies spending money on qualifying plant and equipment.

click here:

SUPER DEDUCTION

Although corporate tax rates for all but the smallest companies will rise in 2023, for those with capital expenditure plans now, this additional relief will see companies get tax relief for £1.30 for every £1.00 spent (at 19% – means an almost 25p in the £1 saving).  It doesn’t apply to all assets so please get advice before committing to it!

Regards

Donald Parbrook

Spring Newsletter 2021

Friday, April 23rd, 2021

Dear All

As the sun is starting to look a lot brighter in the sky, this must mean it is time for our Spring newsletter….click here:

Spring 2021 news

Although some aspects of business are returning to normal for many people, we are still very much focused on supporting those who cannot function normally, particularly the care sector and the hospitality and tourism sector.

The Directors,

Milne Craig

New Recovery Loan Scheme

Thursday, April 22nd, 2021

A new government backed loan scheme was launched 6 April 2021.

A recent news story confirming the details is reproduced below:

The scheme, which was announced at budget and runs until 31 December 2021, will be administered by the British Business Bank, with loans available through a diverse network of accredited commercial lenders.

 

26 lenders have already been accredited for day one of the scheme, with more to come shortly, and the government will provide an 80% guarantee for all loans. Interest rates have been capped at 14.99% and are expected to be much lower than that in the vast majority of cases, and Ministers are urging lenders to ensure they keep rates down to help protect jobs. The Recovery Loan Scheme can be used as an additional loan on top of support received from the emergency schemes – such as the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme – put into place last year.

The Recovery Loan Scheme will ensure businesses continue to benefit from Government-guaranteed finance throughout 2021.

With non-essential retail and outdoor hospitality reopening this week, Ministers intend that new support is still available to businesses to protect jobs. From 6 April 2021, businesses – ranging from coffee shops and restaurants to hairdressers and gyms – can access loans varying in size from £25,000, up to a maximum of £10 million. Invoice and asset finance is available from £1,000.

Businesses who are tempted to secure lending under this scheme should ensure that future trading will generate sufficient funds to cover interest charges and provide cash flow to repay the amount borrowed.

Please call if you would like our help to consider your options.

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