If you have a viable business up and running, you will naturally be interested in its financial health. And you will doubtless be preoccupied with how you can enhance the situation, how you can improve the flow of working capital through the business, where to look for investment to secure its growth, how to keep your backers engaged and committed to your business. Knowing the basics and where to go for help is an invaluable part of the business owner’s armoury.

Here we look at sources of funding, incentive schemes for key employees and investors, cashflow and working capital solutions.

Q             What funding is available for my business?

            Contrary to what you might have heard, there is an increasing range of funding options for small businesses. Equity funding will involve selling a part of your business in exchange for growth capital. The trick is getting the right deal and there are a range of options. If you are at a very early stage, you may need funding to address your financing needs, e.g. for product development. Friends and family, angel investors, incubators and some crowdfunding platforms may consider your pitch for seed funding. Another good avenue would be to look into grants.

Once you’re ready to take your product or service to market you may need further capital input or seed funding. Angel investors and venture capital firms may be interested in a good idea and solid business plan, especially if you have some early sales or other successes. Additional grant funding may also be available.

Expansion or growth capital comes in once you have proved a market for your business exists and you want to expand. Venture capital and private equity firms can help at this stage.

Crowdfunding platforms can offer seed or growth capital in the form of equity investment or debt. Typically, the platform of equity investment or debt. Typically, the platform allows you to upload information and an accompanying video detailing the investment opportunity; the platform’s investor base can then invest large or small amounts (often starting as low as £50 per investor) into your company.

Q             What about SEIS and EIS?

            These schemes are good news for small businesses as they make investing in them more tax-friendly. You need to be a qualifying business (the schemes aren’t open to share investing ventures, property investment companies or providers of legal, accounting or other financial services) operating in the UK.

Both schemes offer investors generous tax reliefs against funds invested in qualifying businesses. SEIS stands for Seed Enterprise Investment Scheme and it encourages investment into very early stage businesses by providing backers with up to 50% tax relief on income tax and exempting them from capital gains tax on their investment (as long as they hold it for at least three years). To extend SEIS to its backers, a business should have less than £200,000 in assets and under 25 employees.

EIS or the Enterprise Investment Scheme is structured similarly. Businesses should have less than £15m in assets (before the investment is made) and fewer than 250 employees. Investors qualify for a 30% income tax relief on their investment and a capital gains tax exemption. For both there is a cap on annual investments and a minimum holding period of three years.

Q             What can I do about managing cashflow?

A             This one is mission critical. The primary cause of small business failure is not having enough cash to pay suppliers, employees, utilities and all the rest.

Your first tool is your budget. Draw it up realistically, build in as many ‘what ifs’ and ‘doom scenarios’ as are workable, and revise it frequently based on last year’s or last quarter’s experience.

Keep track of your customers and do some analysis on which ones are the most profitable and which ones are prompt payers. Keep both these sets of people happy as far as possible. Invoice promptly and follow up in a professional manner. Make sure you understand any special invoicing procedures your customers might insist on.

Look at your cashflow mechanisms. Is your bank overdraft everything you would want? Can you stagger payments on larger assets or to your own suppliers? Are your financing arrangements cost-effective or do you run up large balances on business credit cards at certain times of the year? Don’t be afraid to look into changing these arrangements for cheaper or more convenient arrangements.

Q             How can I free up the cash locked up in invoices?

            Invoice finance is increasingly recognised as a flexible way of keeping cash flowing into the business. Invoice finance providers will advance a proportion of single or multiple invoices and take a percentage on the money that is collected, meaning you get funds well ahead of the invoice due date in exchange for a fee.

Online invoice finance providers are adding even greater flexibility. These sites will auction single invoices drawing on an investor pool. Businesses can access funds on invoices in 24 hours.

MarketInvoice have teamed up with Xero cloud accounting software and Receipt Bank – two businesses leading the way in this field – to bring you advice on finding the right accountant and streamlining your paperwork. In partnership with KPMG Small Business Accounting- whose fixed price accounting packages embrace this ‘value added’ philosophy- we’ve brought you The Accountancy Clinic: an access all areas troubleshooting ebook with answers to the most common accounting questions.


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