News & Blog

Corporate Branding

26. July 2012

There may be a time and a place for it but I can't think of one.

Corporate songs- ever appropriate?- judge for yourself

 

http://www.popbitch.com/home/2012/07/19/the-worlds-greatest-corporate-theme-songs/

A Moment in the Sun

23. July 2012

business money article.pdf (259.28 kb)

 

Always nice to be recognised by your peers and the kind people at Business Money put together the article in the attached file. 

The £25,000 Annual allowance, what does it mean?

4. July 2012

We highlighted earlier in the year on this blog the reduction of the Annual Investment Allowance from £100,000 per annum to the current £25,000 and the impact that this will bring for tax claims on the purchase of plant and equipment.

You are way too late now for the £100k and with the allowance of just £25k what does this really mean when looking at the finance of plant and equipment (excluding cars).

Well once a business spends more than £25,000 on plant and equipment it is unable to claim anything other than a writing down allowance on the cost of the plant at a rate of 18%.

Alongside of this the business does have the option to elect for that asset to be treated as a short life asset* which would allow it to obtain a claim for its net cost by the time of disposal.

So what does this really mean, well it depends how you buy the asset- if we look at the Hire Purchase, Bank Loan (good luck) or cash option and we assume that having already spent more than £25,000 in the year on equipment a  business buys, using hire purchase, a piece of plant costing £60,000 which it uses for three years before selling it for £10,000.

We get this:

HP, Bank or Cash to Purchase        

                                                Allowances             With Election             No Election

Cost                                           60,000

  Year 1 at 18%                          10,800                    10,800                   10,800

                                                49,200

Year 2 at 18%                            8,856                      8,856                     8,856

                                               40,344

Year 3 at 18%                            7,262                     7,262                      7,262

                                               33,082

Year 4 proceeds                        10,000

Year 4 at 18%                          5,955                                                     5,955

                                              23,082                    23,082

Year 5 at 18%                           4,883                                                    4,883

Year 6 at 18%                          4,004                                                     4,004

Allowances obtained by Year 6                          50,000                      41,760

 

Without an election the business continues to make claims until the allowances are exhausted but with these being claimed on the written down balance it will never actually occur.

 In the above example the asset qualified for capital allowances because it was bought using hire purchase, an outright cash purchase or by using a bank but if the business instead used a finance lease this would not be the case.

Leasing is a prime lending tool and for many Leasing currently represent the best method of acquisition not only can obtaining this finance be easier than other options (and keeps the cash safe for a rainy day!) but it accelerates the relief in the early years.

 For this to be the case from an allowance point of view, then  a depreciation rate in excess of 18% is essential and if it is charged on a straight line basis all the better.

In the example previously we did not need to consider what rate of depreciation is charged, but if we now look at this as If it were 20% straight line then the  depreciation charge would be £12,000 per annum and this would compare with our previous “ allowance with election”  as follows:

Using a Lease to Purchase           

                                      Allowances              Finance Lease                    HP and election

Cost                                60,000

Year 1 at 20%                 12,000                       12,000                                 10,800

                                      48,000

Year 2 at 20%                 12,000                       12,000                                 8,856

                                      36,000

Year 3 at 20%                 12,000                       12,000                                7,262

                                     24,000

Year 4 proceeds              10,000

                                    14,000                        14,000                                23,082

Allowances obtained                                         50,000                                50,000

The example shows that the tax relief is the same over the term but that the split favours the earlier years.

In isolation the amounts involved on one asset might be considered immaterial but if a fleet exists or the amount being spent on the asset is much higher then things might change.

Using leasing brings other elements into play. For it to be a finance lease the person using the asset must pay more than 90% of its purchase price and transfer substantially all the risks and rewards incidental to ownership from the owner of the asset. This generally means that in the initial period the full cost and interest is paid in the form of regular rentals.

With a lease the borrower never gets title to the asset and once the initial period is over the business hiring the asset enters a secondary period. In that period they pay a peppercorn rent that is normally 1% of the asset value. They would also have a situation where on disposal of the asset the proceeds are treated as a rebate of rentals with a small proportion being returned to the lender, traditionally a couple of percent, as a handling charge and if you as borrower want to buy the asset this has to be facilitated via a third party.

This is different to an operating lease where the business does not pay the full cost of the asset over the initial term and generally hands back the asset to the lender at its conclusion.

You should consider the position if your depreciation rates are unsuitable. In our example 20% produced a charge in the year of sale that was not materially different to the charge in the previous periods.

If your new rate wrote off an asset in full in a period shorter than the initial term of a lease then I would get ready to be challenged by the powers that be.

This article can only look at generic points relating to the finance of assets and the method of finance so before taking action talk to your accountant for the financial treatment of your purchase and us at Kinetic to get you the best deal for your circumstances.

 

*An asset is a short life asset (SLA) if the person who incurs qualifying expenditure on it elects to treat it as a SLA and it is not excluded from SLA treatment. The actual or expected life of the asset is irrelevant in deciding whether or not it qualifies for SLA treatment. All that matters is that an election is made and that it is not specifically excluded.

Examples of Assets that cannot be treated as SLAs are:

•assets that were provided for some other purpose including leasing under a long funding lease before being brought into use for a qualifying activity

•assets received as a gift

•assets used for special leasing  

•cars apart from cars hired out to people in receipt of certain disability allowances

•long life assets

•special rate expenditure assets

 •assets provided for leasing except:

◦those used in the designated period for a qualifying purpose and for no other purpose; and

◦cars provided for disabled people in receipt of certain allowances;

New commercial loan finance & “Overdrafts” from Kinetic

22. June 2012

We are delighted to confirm that Kinetic now have access to secured commercial loans and overdraft facilities outside of those “offered” by  Banks, providing additional access to finance to those business that may have been turned down by their own lender and are finding it hard to get credit.

Loans are available for a variety of applications from purchasing assets to providing vital cash-flow and working capital finance using a property asset to support a credit application and provide money where many other financial institutions have been unable to assist

Secured on commercial or residential properties via First, Second, or even Third charges (depending on equity), Loans are typically taken over 3- 5 years though extended terms are available.

We can also now arrange overdraft style facilities providing a real and credible alternative to the business overdraft and suitable for those who do not want to use factoring.

 

Using a new and simple funding solution, designed to help businesses access the cash they need to run, develop and grow, you will benefit from immediate and ongoing funding for your changing business needs.

 

Designed specifically for SME’s and those turning over less than £1mn, You can access up to 50% of the value of your sales ledger up to a maximum of £50k,providing you just the amount you need, as and when you need it.

 

To learn more call your Kinetic contact NOW to see how we can help move your business forward

 

Mentoring- All the help you need?

31. May 2012

It is now some 8 months since I have been working with Rockstar Mentees (www.rockstargroup.co.uk) and so I thought I would share some words of wisdom from a recent Blog, which certainly confirms my findings to date, having met some wonderful people, great businesses and helped them along the way, as well as those that sometimes needed a reality check.

“Sometimes running a business can turn into a situation where the stress of day to day management stops you from seeing a clear direction for the future. You become weighed down and you lose the drive and spirit that first made you aspire to run your own business and become a wealthy entrepreneur.  

Inspiration from an outside source such as mentoring can reinvigorate not just the person running a company but the employees, the marketing strategy and most importantly sales. The prime aim of a mentor is to support you within all areas of your business so that your company prospers and delivers sales and profits. Sometimes they may challenge you so that you expand your beliefs on what can be achieved. By making you think more widely and from a different perspective they open new avenues you had never thought of. Their experience and knowledge has been built up over many years, working with all sorts of companies, and by sharing it with you they increase your business skills.

 A business mentor will support you to identify what you want to achieve, in planning what you need to do, in achieving your goals and in making things happen in your business. Your performance as leader of your company is vital to its future and being nurtured with personal support from a mentor is a sound business decision. A mentor listens to you, offers support and feedback and ultimately inspires and motivates you. You may have lots of ideas for your business but need someone with sound business knowledge and experience to bounce them off.

Working with a mentor has made a great difference for many SME’s in terms of both building turnover and avoiding costly mistakes. In today’s challenging economy more and more entrepreneurs have benefited from the relationship formed with a mentor”.

The Last 6 months

17. April 2012

I hope you all had a good Easter break and are back in the swing of things- it will soon be the Jubilee and then the Olympics!

It is hard to believe that 6 months have passed already since Kinetic Business Advice was launched on an unsuspecting business community (!) and I am really pleased with the way things have gone and the support that we have had from a wide range of introducers and funders- Thank you.

The general market conditions still remain tough but there is also a genuine desire amongst our funding panel to help and work with businesses. Here our expertise in putting a deal together is obtaining not only the ultimate sanction and aiding turnaround times, but also reducing the perception of risk inherent in advancing funds and therefore the final price to the client.

I am also proud to say that despite on occasion having been turned down elsewhere, every business that has become a Kinetic client has been offered facilities.

Our introducers appreciate that rather than investing their own time, it is sometimes better to outsource an element of a client’s needs to Kineticwhere we can provide a dedicated resource solely focused on the funding request and by working closely with the client arrive at a bespoke solution to better meet their needs- As well, of course, as the financial benefit of being part of our “Reward Recognition Programme”, sharing in the clients and our own success.

Just to highlight a few areas, we have been able to raise funds to aid turnarounds (preventing the need for businesses to cease to trade), have helped growing business fill their funding gap, provided finance to purchase plant/ machinery and reduced businesses funding costs.

We have also seen a marked expansion in our Mentoring services with clients able to dip in and out for help with certain projects, or take on a longer term commitment working with us to move their business forward. Here we are currently engaged with 5 businesses ranging from a rapidly growing Equity Research Analyst Company, through to a Professional Voice Factory, Solar PV business, On-Line Property Company and a Dance/Fitness studio.

Previous Blogs have detailed a few examples of the recent work we have completed and I very much look forward to seeing how I can help you over the months to come.

If you would like a meeting to learn more and look in greater detail at how we can work together, then please do get in touch.

 

A few recent successes

23. March 2012

Some recent successes achieved by Kinetic for its Clients, if you would like to see how we can help your business move forward  then call now.

 

 

       £500,000 stock finance for high end, on-line, Fashion store selling B to C

 

 

           Vehicle Finance for Phoenix company with no directors guarantees

 

 

 

     £2,500,000 combined Trade & Invoice Discounting facility for importer

 

 

     £200,000 Spot Factoring facility for new start clothing business

 

  Mentoring client, engaged to help expand and reposition hedgefund advisory business

 

    Turnaround refinance and advice for established engineering company

 

   £400,000 Invoice Finance Facility for Fruit Juice importer

 

    Consulting advice for expanding portrait and designer clothing business

When the Sun comes up you had better be running!

6. March 2012

It may seem all is doom and gloom and the press certainly still likes to highlight problems of course and we do have big headlines of  euro-area leaders stumbling from one crisis summit to another, with  fears heightened over a collapse in the euro and of Europe slumping back into recession, Greece in trouble, and Spanish and Italian bond yields rising to unsustainable levels on the back of contagion fears Yet 2012 has begun with a raft of positive statistics – even though there was a disappointing fourth quarter (Q4) 2011 UK gross domestic product (GDP) .

 Latest information compiled by St James Place Bank shows that:

 

Corporate profitability continues to rise; it is now at its highest since Q3 2008. UK public finance figures for December show that government borrowing is coming in comfortably below 2010 levels, with public sector net borrowing (excluding the temporary effects of financial intervention) of £13.7bn being less than the previous December figure of £15.9bn, and less than forecast .

January’s Confederation of British Industry (CBI) industrial trends survey offers hope of a recovery in the manufacturing sector, with the output expectations balance rising from -8 to +15, its highest level since May 2011 and the purchasing managers’ index (PMI) – a key measure of business confidence – rose from 47.7 to 49.6, prompting Markit’s Chief Economist, Chris Williamson, to comment:

“This is the strongest monthly expansion of private sector business activity since July.”

In the US, an unequivocally strong employment report saw non-farm payrolls increase by 243,000, a nine-month high, while the unemployment rate fell to a three-year low of 8.3%.

There was further good news from China, with signs that its economy, particularly the property market, is going through a gradual slowdown rather than a collapse – the much hoped-for soft landing.

Whilst the financial media prefer to focus on the ‘bad news’, it is important to recognise that economies tend to encounter a gradual shift in the balance of good news over bad, and investor sentiment and markets often move ahead of a full economic recovery – certainly 2012 has begun very positively. The stock market rally which began in December has continued into the New Year, with shares around the world experiencing their strongest start in 18 years.

In Europe, the European Central Bank’s (ECB) offering of €489bn of cheap money, known as the long-term refinancing operation (LTRO), to the region’s banks has acted in a similar manner to quantitative easing, pushing down bond yields and substantially easing the pressure on the Eurozone. With the second round of the LTRO commencing on 29 February, economists estimate that as much as €1trn could be taken up by banks. Whilst helpful in avoiding a second ‘banking crisis’ the jury is out as to whether this will have any positive impact on the European economies given banks’ continuing propensity to hoard liquidity

In December, the ECB sent a strong signal to the financial markets by offering to lend €489bn to 523 euro area banks in a massive three-year operation. A further €529.5bn was handed out to 800 lenders at the end of February. The bank-funding move by the region’s central bank (the LTRO) is open to all lenders across the Eurozone and expands the central bank’s balance sheet by approximately 20%. The LTRO is the first operation of its kind undertaken by the ECB and it allows banks to borrow funds at the average benchmark interest rate, which currently stands at 1%. The overriding goal of the operation is to increase liquidity in the financial system across the region.

 

So there is some good news out there, but will things suddenly change and we all hit boom times?- NO

Will staring aggressively at your phone bring more sales in- NO

This is the market we are in so deal with what you have, But don’t let the doom mongers think they have it all their own way, for well run businesses, or those that are willing to take on expert advice through experienced Mentors  (such as www. Rockstargroup.co.uk), now is a great time to  exploit what is out there and drive your company forward, taking advantage of others weaknesses- to use a well known saying:

“Every day in Africa a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed.

 Every morning a lion wakes up. It knows that it must outrun the slowest gazelle or it will starve to death.

It doesn’t matter whether you are a lion or a gazelle.

When the sun comes up, you better be running”.

 

Lucy Armstrong. New chair of Capital for Enterprise Limited (CfEL).

27. January 2012

I am sure she is very lovely and clearly highly intelligent and successful, but yet again the government has appointed someone into a role that from what I have read, I feel will not be able to help/understand the needs of the real small business person- the micro businesses of 1-5 staff, the ones that are never going to expand into large wealth creating business and may have no desire to be such, but yet remain at the backbone of our economy.

They just want to be successful by their own standards, enjoy what they are doing and have the support of Banks, funders and yes Government, when needed.

Until the Government and Banks realises this is where real support is needed and not just through the Enterprise Finance Guarantee Scheme or Invoice Finance facilities (not suitable for all and does not bring fresh money into a business only accelerates the working capital cycle- and I say that as a major advocate of the service), things will stay as they are.

 

Business and Enterprise Minister Mark Prisk today announced the appointment of Lucy Armstrong as the new chair of Capital for Enterprise Limited (CfEL).

Capital for Enterprise Limited is the company which advises the Government on the design, implementation and management of finance measures to support small and medium sized enterprises (SMEs) across the UK. It manages programmes that provide around £4 billion in finance to SMEs.

 

For full details see:

http://nds.coi.gov.uk/content/Detail.aspx?ReleaseID=423014&NewsAreaID=2&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+bis-news+%28BIS+News%29

 

 

Nice to be Appreciated- A plan comes together

25. January 2012

It is always nice to have your efforts appreciated and sometimes we do forget to say thank you.

Fortunately I have great clients, but even so we went some on this one.

We had the enquiry in on late Friday afternoon, an offer in principle first thing Monday, Final offer Tuesday and a “take on” that took place today (Wednesday) with funds due in my clients account for tomorrow.

This initial transaction was to finance the first 3 invoices raised for sales made into a retailer, which we did, totalling nearly £200,000 despite liquidator damage clauses in the contracts and this being the client’s only debtor.

Now they don’t always go that smoothly, however the client was well organised and professional and we know how to package up these transactions, but still it is nice when a plan comes together.

Their comments are below and yes I did say Thank you to the funder (and the introducer!).  

“Just to confirm that the funder visited our offices this morning and we have concluded the financing arrangements for the Invoices. We expect to be in funds tomorrow. 

Many thanks for your kind attention and for making these arrangements so quickly. This has been very much appreciated.”

Kindest regards

MICHAEL

So if you also need finance, for a new venture or to support an existing, please do get in touch.