Women-led startups the UK economy
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Women-led startups are more fundable but men receive most of the cash

A study by Access Commercial Finance found that only 16% of applications received since July 2016 were submitted by women.

The firm handled 833 applications in total during that time period, but only 135 of those applications came from women. Men made 698 applications for funding during the same period.

However, the research showed that the women who did apply for funding had a success rate 18% higher than men. 13% of applications from women were successful, compared to 11% from men.

Overall though, due to men making 84% of the funding applications, they received the vast majority of funding awarded, £4,051,052 in total. Women received £332,437.

Not only are women less likely to apply for funding than men, they also ask for less money on average when they are do apply.

Based on applications where the full amount applied for was awarded, women received £22,162 each, £28,476 less than men, who received £50,638 each on average

Matt Haycox, consultant at Access Commercial Finance, hopes the findings encourage more women to think about applying for business funding.

“This data shows us that women are on average either better at putting together a funding proposal for their small businesses, or they just have more fundable businesses. Either way, it’s potentially good news for women-owned businesses and startups.

“But given the low application rate and low funding request amount for women, men are still getting most of the cash due to sheer volume of applications.

“We hope our data gives any woman considering applying for business funding the confidence to do so.”

Source: London Loves Business

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Entrepreneur ISA: should new businesses get a Government bonus?

There are calls for the Government to offer an Entrepreneur ISA to encourage more people to start businesses. One of the campaigners behind the idea tells loveMONEY how it might work.

Cash flow is one of the biggest issues facing small businesses and entrepreneurs need more help with their finances. To do this, one idea has been brought to the Government with hopes of an announcement in the next Budget – an Entrepreneur ISA.

It would work in much the same way as the Help to Buy ISA helps aspiring homeowners, offering a Government bonus for saving towards your small business.

Ewan Edwards (pictured) is the head of savings at Aldermore Bank, the firm which is spearheading the campaign.

He tells loveMONEY more about how the Entrepreneur ISA might work.

Why do you want the Entrepreneur ISA to come to the market?

Small businesses are typically underserved by bigger banks. They would offer savings account offering low rates, playing on people’s inertia.

In business savings, inertia is caused by business current accounts. You traditionally go to big banks for that.

We’ve found a slightly irrational fear about not having savings with their bank, like they might somehow damage their credit record or damage their relationship with the bank.

Business savings as a concept is quite underdeveloped. You talk to SMEs about business savings and they don’t instantly get the idea. They think about current accounts or overdrafts.

When SMEs have excess cash, why do they leave it languishing at 0.5%? Some either make nothing and, in some cases, charge transaction fees too.

How would it work?

We were thinking that you’ll get a 25% Government bonus matching £50 – £200 in deposits a month.

With the Help to Buy ISA you make a contribution and then you get a 25% bonus from the Government to go towards your deposit. And we thought: “Wait a minute, maybe we could take the HTB ISA and apply it to start-up businesses,” hence the phrase ‘Entrepreneur ISA’.

It’ll be like a HTB ISA in that when the person buys the house, the bonus is activated. But in this case, when the business launches it’ll be activated. So, it could be nine months, one year, whenever.

It’s bound to go in your favour when you want to borrow some money from a corporation. Like you’re saying “Look, I’m serious about this”, with tangible evidence to support the bank loan. You can prove to them that you’ve been saving for three years.

It would be the Government’s product so ultimately, it would have to decide on the terms and conditions.

The Entrepreneur ISA should be cost-neutral. As part of that negotiation with the Government, we’ll have to accept that there will be some trade-off elsewhere.

Our second idea is the Small Business Savings Allowance. Again, why can’t the same principle of the Personal Savings Allowance apply to small business savings? It’ll help with their resilience and their lulls in trading cycles.

Overall, we thought the ISA would be aimed at budding entrepreneurs, while the savings allowance would be aimed at existing SMEs.

Is the Government on board?

We met with an MP and written to the small business minister and we’re meeting with his officials. It’s a slow burn but so far, so good.

The first thing we said is that you don’t have to borrow money. You might want to save up and do it that way. What we’re trying to do is say that there’s the option to do both.

It’s our role as a bank and as experts in the industry to talk and educate about the differences, encouraging small businesses to save.

When we did our research, the ISA got a lot of favour from existing entrepreneurs and would-be entrepreneurs. They want the simplicity, the tax-free, the Government bonus. Those things resonate well.

And the businesses we spoke to all said the same thing: “This would’ve been great if I’d had the opportunity”.

You can go on the website – we’ve got a change.org petition. The more people get behind it, the more powerful the lobbying will be.

What challenges do SMEs and entrepreneurs face?

We’ve highlighted a couple of ‘pain points’ for would-be and growing entrepreneurs.

For the newer starters, it’s more of a struggle finding clients and marketing the business (21%), understanding tax requirements (10%) and invoicing (9%).

Meanwhile, for growing businesses it’s about generating sufficient cash flow (10%), dealing with unexpected costs (7%) and understanding tax requirements (6%).

A substantial 63% of people think the Government should provide more help to people who want to start their own business.

Let’s send a signal to Government that we’re really supporting SMEs. There are 5 million of them in the UK – they dominate the UK in terms of employment. The majority of start-ups are SMEs, the lifeblood of the economy.

What help is available for entrepreneurs now?

There’s a whole bunch of reliefs and grants out there – I’m no expert in all those things. Suffice it to say, you speak to SMEs and they’re quite bewildered by it all, they find it very complicated.

ISAs are well understood – they’re a known entity. They can get their head around the idea of an ISA, having it tax-free.

Aside from that, entrepreneurs should try and be more active with their bank accounts as it can be easy to be passive. Being online makes that active management much easier.

They should also put surplus cash in an account paying a higher return – it might only be for a month, but it’s still a month’s interest.

Source: Love Money

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Just 11% of business lending is now fixed-rate loans

Just 11% of the £416bn in total stock of loans to businesses are now being provided on a fixed rate – dropping by a third from 18% two years ago.

This leaves businesses with huge exposure to rising interest rates, Hadrian’s Wall Capital, the London-based specialist debt adviser, argued.

The drop came as banks prepared for interest rate rises and de-risked their loan books. Hadrian’s Wall Capital thought this has left businesses dealing with significant uncertainty over their cost of finance and unable to plan corporate finance activity and investment over the coming years.

Marc Bajer, chief executive of Hadrian’s Wall Capital, said: “Now is the time for small businesses to lock in to fixed-rate debt, before interest rates rise again.

“However, fixed-rate loans are now virtually unavailable from banks, and many SMEs are reliant on floating rate debt. Any jump in interest rates could see small businesses burned by their reliance on floating rate loans.

“Corporate finance advisers should also consider fixed-rate debt when it comes to their corporate finance activities, so as to reduce the threat to them and to their clients, of rising interest rates.

“When interest rates rise, small businesses are likely to suffer financial damage – a rise in the base rate to just 1.5% would cost UK small business billions.”

The firm said that fixed-rate loans are now increasingly difficult for businesses to obtain – especially for small and medium enterprises.

The expected further rise in interest rates of 0.25% in the coming months will cost British SMEs another £355m in interest payments in the first year alone.

Data provided by the Bank of England showed that in 2012, the share of all bank loans to businesses had a fixed-rate as high as 49%.

Hadrian’s Wall Capital said the consequences of both the Credit Crisis and the swaps mis-selling scandal has meant that SMEs are now extremely wary of using swap products.

Additionally, SMEs also have great difficulty in obtaining approval from any institution to fix the interest rate on their loans using swaps, removing another layer of protection from rate rises for businesses.

With interest rates now on the rise, there is a risk that SME growth planning and corporate finance activity could be shelved for the present, as businesses choose to wait for less uncertainty over the costs of floating rate debt.

Hadrian’s Wall Capital said it is important to continuously revitalise UK business by giving them un-interrupted access to debt refinancing, MBO’s and MBI’s.

Fixed-rate lending for such corporate finance activities can help to reduce the risk of rising interest rates to these SMEs.

The growing shortage of fixed-rate bank lending to SMEs has led Hadrian’s Wall Secured Investments to focus on providing long term, fixed-rate, non-callable loans to SMEs, giving them intermediate to long-term certainty over their cost of funding.

This enables them to undertake corporate finance transactions and plan long-term programmes of investment in their businesses.

Source: Mortgage Introducer

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Ways Brexit will affect UK SMEs

We are just under a year away from the official date for Brexit. Though we would hope that the incumbent UK government can agree some form of deal that will allow the UK to continue to trade while matters are dealt with, there is significant uncertainty across the country on the impact of Brexit and understandable anxiety has led to scaremongering. While there has been a focus on how this will affect large corporations there is not as much evidence of how this will affect UK SMEs, long considered the backbone of the UK economy.

There are 5.7m SMEs in the UK which account for over 99% of private sector firms and 60% of total UK private sector employment. SMEs also account for 73% of all net private sector job creation in the UK, creating about 2m jobs since 2010.

Of course it is not possible to predict the exact impact of the final decisions before they are made and know how they will play out over the next 12 months and beyond, but there are ways to ensure that your business is in the strongest position possible.

This blog explores key themes that may impact your business and things to keep an eye on, as well as practical tips to manage predicted challenges. Be prepared. Take advice. Keep up to date.

Ways that Brexit will affect UK SME businesses  

  1. Staff Employment

Businesses may already be experiencing challenges in the labour market with their staff uncertain of what their position will be post Brexit. A recent study by the Association of Professional Staffing Companies (APSCo) found that companies were finding it increasingly difficult to fill roles, with vacancies in finance and banking up 12% and engineering and construction openings rising by 10%.

Businesses will need to review their workforce continually to ensure that they can meet new changes head on. Companies which rely heavily on European workers need to ensure they have appropriate plans in place going forward to ensure their staffing needs are met.

It is never too late to start preparing. With apprenticeships very much in the spotlight for the government and media, take advantage of the new non-levy and levy contributions system and the new employer-led apprenticeships. Partnering with your local college or training provider could ensure the stability of your future workforce and guarantee trained employees for years to come. 

  1. Tariff and Trade Requirements

The UK government is currently still in discussions with Europe regarding a trade agreement post-Brexit, so at present it is still uncertain what the future landscape will look like. Until such time that we have a clearer picture on a future trade agreement, UK businesses need to remain aware of how any increases in tariffs might affect their businesses.

Businesses should ensure that their current pricing structure is robust enough to absorb any future tariff increases. Create models and test different scenarios to arm yourself with the reality of how these fluctuations may impact your business.  It is never an ideal scenario but you may need to review and increase prices in order to remain competitive. 

  1. Brand Names & Trade Marks

Like various other matters, specifically legal, there is uncertainty around how trademarks and brand names will be protected once Britain leaves the EU. Will a EU registered trademark continue to be valid in the UK? If your business has a registered EU trademark they will ensure that you are aware of the necessary measures to be put into place post-Brexit. Whether that be conversions, new registrations or some other form of system businesses should prepare, to ensure that they can protect their intellectual property.

With this type of issue it is impossible to guess, but make sure you follow any updates closely and take advice. Discuss any concerns with your lawyers – they may even have set up specialist teams working on the impact of Brexit and changes to international law who will be able to keep you update and make sure there are no unwelcome surprises. 

  1. Supply Chain Issues

What is certain post Brexit is that the administration and associated costs of importing goods into the UK will rise. VAT and duty deferment for example will become much more complex. Pan-European companies who currently benefit from economies of scale will lose these post Brexit so UK businesses could find themselves being charged more for the services that they currently use. Whilst we await certainty on these changes spend the time forging stronger relationships with your customers and suppliers. The better you get along with the people you do business with the more likely they are to be understanding. It may need to be a case of give-and-take whilst everyone adjusts to the new systems and the more openly and regularly you are communicating with your network, the better.

As touched on previously, staffing will be a majorly affected area for some businesses post-Brexit. But the movement of current staff may also be seriously affected. At present, staff can be deployed to anywhere around Europe at a moments notice. Whatever rules the UK implements on movement and immigration are likely to be mirrored to all staff. If lots of your team are from overseas or if European travel forms a large part of your standard business operations, it is definitely worth consulting with a legal specialist in this area. They will not only advise you on what to do now, will also keep you abreast of any changes as they happen and guide you through any evolution 

  1. Funding

Brexit will bring with it the loss of certain EU funding schemes for SMEs. Whilst these central European programmes providing SME finance will no longer be available, the bigger concern for business owners is what the appetite will be from current high street lenders to the SME market. What does this mean for their growth plans?

The flourishing alternative finance market has been bridging the funding gap left behind by the banks since the 2008 crisis. Brexit does not mean that you need to put your ambitions for your business on hold. Nor does it mean that you should not seek external finance.

Although in times of uncertainty the instinct is to retreat to safety and avoid bold decisions, this fear of the unknown could turn Brexit predictions for the economy in to a self-fulfilling prophecy.

Certainly it is always wise to exercise a degree caution – but that is true of all business decision making.

The business lending market is the strongest it has ever been, with more options available to businesses than ever before. Capitalise on this strength vs the perceived uncertainty post-Brexit. By planning, preparing and seeking a long-term finance partner now you can take the time to explore all your options, consult experts and find the right product that fits your business. You can continue to deliver your growth plans, or even just ensure that you have that reserve pot of money for peace of mind.

It is always much better to look for finance when you don’t need it – rather than waiting for the situation to become desperate when no one will want to lend and what you’re offered won’t be competitive. 

Although there may still be uncertainty the topics discussed here should allow you to safeguard your business as best you can and seek advice from professionals, where it matters. 

Source: SME Web

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Alternative finance key to British business growth

Alternative finance holds the key to funding expansion for many British small businesses, as access to funds from traditional lenders remains restricted. According to a recent survey of 1,000 small business owners, almost one in three reported difficulties in securing business loans from banks, potentially halting their expansion plans.

To help address this issue, Worldpay has announced a three year extension of its popular Business Finance scheme, aimed at helping over 300,000 British small businesses access alternative financing by enabling access to a “cash advance” based on their future credit and debit card sales. The scheme, launched in 2015 in partnership with Liberis, a leading provider of cash advances to small businesses, has already provided funding in excess of £50 million to UK SMEs. Under the scheme, funds can be made available to businesses in as little as 72 hours.

Chris Andrews, proprietor of Blacks Cheese, is one business owner who has utilised Worldpay Business Finance to help address stock purchasing needs.

“Worldpay Business Finance became apparent as an alternative method of funding the business, at a time when we needed it instantly and it was delivered within a matter of hours. Worldpay is now part of our financial reckoning, and it’ll be one of our tools that we’ll always use and it’s not going to be something that we need to consider. We know how it works, we know how it funds us – it’s paid off for us.”

Alternative finance, while available to all types of small business, is proving particularly popular with start-ups. Worldpay’s research revealed that businesses under five years old are as likely to select alternative finance methods to secure capital as approaching banks. Analysis by Worldpay of how these funds are used reveals that in 2017, direct investment in businesses, including stock purchase, expansion & refurbishment funds and equipment purchases drove 87 per cent of the cash advances.

Despite its growing popularity, the research also revealed that business cash advances are among the least known forms of funding, with only 2 percent of businesses indicating an intention to use this form of finance in 2018. At the same time, business owners aged under 35 indicated they are more likely to place their confidence in alternative financing as a way to reduce their reliance on banks, with 40 percent stating its emergence will make things easier. With the extension of the Business Finance scheme, Worldpay and Liberis will work to address this lack of awareness.

“Steve Newton, Executive Vice President, UK and Europe Worldpay said: “Worldpay Business Finance has proven extremely popular with small businesses looking for alternative methods of finance. Worldpay Business Finance was created specifically with the unique needs and structure of small businesses in mind – it’s flexible and it’s fast.

“In 2017, we tripled funding for growth to UK SME businesses and have now advanced over £40million – but we know that this form of funding has the potential to help thousands more.  So over the next year, we’ll make it easier to access the scheme by increasing call centre and online support to enable Britain’s small businesses to thrive.”

Source: London Loves Business

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London’s small firms hit with £8.2bn business rates bill

The business rates bill hitting London firms will rise to £8.2bn today, raising the prospect that firms could move out of central parts of the capital due to high property costs.

Both the national living wage and business rates increase across the UK today, and, according to the Federation of Small Businesses (FSB), London now pays 33.1 per cent of the country’s total business rates bill.

Meanwhile, the national living wage will rise by 4.4 per cent today, from £7.50 per hour to £7.83 per hour.

High property costs are threatening to push some businesses out of the centre of London. A recent survey from the FSB found that 60 per cent of Zone 1 firms fear they will not be able to afford their current premises in five years.

Sue Terpilowski, London policy chair at the FSB, said there should be a major review of the business rates system.

“Many small business in London will see their business rates increase upwards of 20 per cent on 1 April,” she said.

“The high cost of doing business is putting additional pressure on wages and inflation for London businesses. The cost of employing staff generally and the heavy burden of cripplingly high commercial space costs is having additional negative impacts on small businesses.”

Source: City A.M.

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New business rates changes to help Scots businesses to ‘thrive’

NEW business rates changes coming into force in April will help stimulate the economy and improve transparency, the Scottish Government has said.

From April 1, there will be no business rates for unoccupied new properties and tenants who take them on will be rates-free for the first year.

Where properties are improved, they will not pay any additional rates as a result of the improvement for 12 months.

Eligible childcare day nurseries will receive up to 100 per cent relief.

The changes were announced last September following the Barclay review of business rates.

Finance Secretary Derek Mackay marked the start of the new policies by visiting The Orchard Nursery in Edinburgh.

He said: “These changes – many of which are unique to Scotland – will help our businesses to continue to thrive while also ensuring they make an appropriate contribution to important local services. When I appointed Ken Barclay to review the rates system, I tasked him with updating it to better support business growth, encourage long-term investment and enable businesses to better navigate fast-changing marketplaces.

“The changes we put in place – in many ways going further than the Barclay recommendations – also allowed us to offer wider benefits, such as supporting the expansion in funded early learning and childcare entitlement with the relief for nurseries. I’ve been impressed with what I’ve seen at The Orchard Nursery and hearing how they intend to use the savings they will make next year.”

The Scottish Government said the relief for nurseries was designed to support nursery provision throughout Scotland by reducing overheads for nursery owners, saving the sector around £6 million next year.

Vicky Coia, owner of The Orchard Nursery, welcomed the changes.

She said: “We are pleased the Scottish Government has led the way by creating business rate relief for the nursery sector across Scotland. It will allow us to invest in more training, staffing and resources to enhance staff practice and the opportunities and experiences we offer the children and their families.”

Andy Willox, the Federation of Small Businesses (FSB) Scottish policy convenor, said: “These new measures from the Scottish Government take us a step closer to developing a fairer, smarter rates system. FSB made the case for these changes in our submission to the recent rates review, and we’re pleased to see ministers turn them into real help for local firms.

“Local nurseries are a prime example of smaller businesses that are fundamental to the success of their local community and economy. These new rates should ensure that they aren’t penalised because they operate from specialised premises.

“At FSB, we’re firmly of the belief that if a business makes an improvement to their property they should be given an opportunity to recoup their costs before facing a higher bill. The Scottish Government’s new business accelerator relief does exactly that.”

The Barclay review set out 30 recommendations for changes to the business rates system in Scotland.

Two of the report’s recommendations were rejected. Farms will not be placed on the Valuation Roll and they will continue to be exempt from rates. Large-scale food processing plants on agricultural land will also not become subject to business rates.

Source: The National