Use your business plan to get funding

The essential elements of a business plan

Potential investors and lenders will look closely at your business plan to help them decide whether to risk their money.

There is no standard format but most plans include:

• An executive summary highlighting the main points - to catch people's attention.
• Details of key personnel with an organisational chart showing individual responsibilities.
• Market research - details of competitors and how your product or service fits into the market - eg who your potential customers are and why you think they will buy your product or service.
• Your marketing plan - how you are going to get your product or service in front of potential customers, together with any assumptions made when setting your targets.
• Financial information - eg key ratios. These can be used to compare your business' performance against industry benchmarks. It's also a good idea to give details of any major expenditure you have made on long-term assets and explain the reasons behind any changes in working capital items, such as stock, debtors and creditors. Remember to include balance sheet and profit and loss account details. Many lenders ask for three years' financial information. If this is not available, supply details about trading to date.
• How you will manage credit, expenditure, stock planning and control, and debtors and creditors.

When seeking funding, include:

• A cashflow forecast indicating the amount of funding you need and why. For a start-up, include estimates of how much finance you will require for two to three years or until you start to make a profit. Indicate contingency funds that might be needed for rough patches. This is usually between 10 and 20 per cent of the total funding requirement. See our guide on cashflow management: the basics.
• Financial forecasts for a three to five-year period. Try to present this information in the same way as historical financial information, so that straightforward comparisons can be made.
• How a loan will be repaid, how investors can get their money back, and when.

Sources of fund are available in the form of

Bank financing in the form of Invoice financing. This allows you to raise your sales invoice and use a bank or a finance company to get a large percentage of the income immediately. Which will allow you to ease your cashflow

Overdraft facility with the bank - this is normally short term and can be recalled on demand.

A secured long term loan funding equipment or property.

Car financing with your local bank or car retail store.

There is some financial assistance to companies based in deprived areas for equipment, websites and training needs for staff. These are very few and far between and strict rules apply.

There is business assistance and courses available for new start up businesses in the Cardiff and Wales areas.    www.businessinfocus.co.uk

Equity financing.  This is related to gaining finance from private investors, they take a percentage of your company. In return you get business advice and mentoring, along with funding.  This option is normally suitable to fund large expansion plans, or to take your business global.  There is normally a contract in place confirming payback terms, interest and purchase of your shares back.

The Business Link website has an article dedication to informing small businesses about financing available.

Business Link Website

Another link that might be useful is the European Social Fund.  There are trained experts in the field who can apply for funding on your behalf.

http://www.dwp.gov.uk/esf/funding-opportunities/

What banks look for in a business

All investors assess applications for loans or investments using different criteria, and you should ensure you are aware of any specific requirements before making your application to particular lenders or investors.

However, if you are applying for finance from a bank or just setting up a new business bank account, there are some general points that almost every investor will want to take into account:

• a good financial track record and credit history for you and your business – see the page in this guide about credit rating and scoring
• a good management team with the right skills and expertise – involve your senior team from the start
• a business plan that shows clear thinking on ideas and strategy – this is an essential tool for your business and should include up-to-date financial information
• commitment from management and (as appropriate) other shareholders - the investor will need to be assured that the investment is one that everyone at the top of the business is happy about
• security - most lenders will want their money to be secured against tangible assets, so they can be sure of getting their money back
• your understanding of your market - the investor will probably want to make their own investigations of the market, but will need to know that you understand it as well

Even if your proposition is good, there are some things which will weigh against an application for loans or other funding:

• unauthorised overdrafts
• missed loan repayments
• County Court judgements against the business or its directors
• adverse credit rating data, against the business or its directors

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

2022 is the year where we move passed the pandemic. We have to think positive. It has been a long and difficult two years. We must pick ourselves up and get back on track. Whatever goals we had, we must try to achieve these, even if we have to tweak our usual processes to create an environment to allow us to progress. 

As April gets closer, the new financial year starts and with it some revised rules and regulations. We talk about the changes in national minimum wage and the introduction of the social levy care. The social levy is a 1.25% charge on National Insurance from April 2022. The rate also affects Employers National Insurance, and the dividend rates will also change in line with the new social care levy of 1.25%

Why is this levy being introduced?

The funds from the social care levy will be used for care homes and funding for pensioners. This includes several reforms to how people pay for adult social care in England, supported by £5.4 billion of investment over the next three years.

The National Insurance contributions rates will decrease back to 2021 to 2022 tax year levels and will be replaced by a new 1.25% Health and Social Care Levy where the revenue will be ringfenced to support UK health and social care bodies.

This will affect us all.

The new rates for National Insurance are below:

Individuals above State Pension age will not be affected by the temporary increase to National Insurance contributions for the 2022 to 2023 tax year but will be liable to pay the levy from April 2023.

National Minimum Wage

As with every April, the Government traditionally bring changes to the national minimum wage rates. Following the advice from the Low Pay Commission, the government will increase the National Minimum Wage from 01 April 2022.

Anyone that does not abide by these rules, can get big fines.

The new rates from 01 April 2022 are below.

Message us on nicola@crossaccountingservice.co.uk if you want to discuss how this will affect you. Our staff from our Cardiff and Bridgend office are always happy to help.

*Please note we will update this in the next few days, after today's Spring Budget announcement