Originally written by Timothy Adler on Small Business
Rishi Sunak will announce an overhaul of the government’s coronavirus small business loans scheme on Friday (April 3) in response to mounting anger.
The government will remove the requirement for small businesses to show that they have no other means of funding before accessing the Coronavirus Business Interruption Loan Scheme (CBILS).
Firms trying to use the coronavirus small business loans scheme say banks have been demanding personal guarantees and quoting double-digit interest rates, driving applicants towards standard business loans.
Small business owners told MailOnline that they are being offered interest rates for between seven and 30 per cent on CBILS emergency loans – despite current UK base rate being 0.1 per cent.
Higher interest rate
Denice Purdie of Kinross-based Kapital Residential told Small Business that Bank of Scotland was advising her to apply for a conventional bank loan at a much higher interest rate. “This is not guaranteed and will take too long,” she said.
Sky News reports that Mr Sunak and his Treasury officials have been in talks with participating lenders, which include the high-street banks.
Although all the big banks have stated that they will not force small business borrowers using the CBILS to put up personal guarantees
Tag Archive for Small-business Banking
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Nearly 1m businesses on brink of collapse, warn accountants
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
UPDATED: More than 800,000 businesses are within weeks of going bust because they can’t get the coronavirus business interruption loan.
Nearly one-fifth of small and medium-sized businesses are unlikely to get the cash they need to survive another month despite promises of unprecedented government support, according to the BBC Today programme.
Many firms have told the BBC that they can’t get the emergency loans or that the money will take weeks to come through.
With bank branches shut, thousands of struggling firms can’t get through by phone or when they do, they are being told they are not eligible.
>See also: How to get the government’s £10,000 cash grant for small businesses
Banks told the BBC they are following government rules on SME lending that firms only qualify the emergency loans if they cannot borrow in a normal commercial way or by taking out a loan against property.
Small business owners have contacted Small Business, saying they are being pushed towards standard commercial loans when they have rung up about the CBIL and that without a CBIL many businesses face collapse.
While grants are promised for the hardest-hit sectors such as retail, leisure and hospitality the group suffering from a
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Banks not cooperating with coronavirus loan, complain small businesses
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Small businesses complain that high-street banks are not entering into the spirit of the government emergency coronavirus loan, pushing them towards expensive products instead.
Entrepreneurs who have contacted Small Business show that banks are either wrongly understanding the Coronavirus Business Interruption Loan Scheme (CBILS) by asking for personal guarantees or are deliberately up-selling it, directing small businesses to take out regular business loans instead.
Alice Douglas, who runs St Curig’s Church bed and breakfast in Snowdonia, North Wales, said that she is faced with £20,000 worth of cancelled bookings because of coronavirus closure. She spent two days trying to get through to her bank, including seven hours of being put on hold, to ask for an overdraft extension. When Douglas – who has been with her bank for 40 years – explained that she needed financial support, her bank asked her if she had another income source over the next few months. When she said no, the bank said it was unable to help.
Douglas said: “I then asked [the bank] about the Coronavirus Business Interruption Loan but they said as I have no income at the moment they can’t do anything. Which defeats the whole
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Should I use a personal bank account for my small business?
by James Trowell • • 0 Comments
Originally written by James Trowell on Small Business
Q: Should I use a personal bank account for my small business?
A: The short answer is no – but you’re not alone if you do. We conducted a survey earlier this year and found that 63pc of sole traders are using a personal account to pay for everything. Business, pleasure, household bills and everything else in between.
This might feel like an easy option for the busy, fast-paced life of a small business owner, but it doesn’t serve you or your business very well. One bank statement. One never-ending list of transactions. It’s likely to create a financially unstable solution to managing your money because you’ll never really know where you stand.
It’s a little different if you’re operating as a limited company. While it’s not strictly a legal requirement to have a dedicated business account it’s strongly advised. As your limited company is a separate legal entity, technically its money doesn’t belong to you and so needs to be separated from your own finances.
Here are some reasons why keeping your business and personal finances separate is a good idea:
Save time and money when it comes to your tax return
If you’re self-employed you can claim
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One in five small businesses fell into their overdrafts last year
by Anna Jordan • • 0 Comments
Originally written by Anna Jordan on Small Business
Almost one in five small businesses have struggled with no cash in the bank, according to new research by Fluidly. The survey of 19,799 companies found that those having to use their overdrafts rose from 13.9pc in March 2019 to 17.8pc in January 2020.
Late payments, Brexit and economic uncertainty appear to be taking their toll as many businesses went into their overdrafts in nine of the 11 months tracked.
Plymouth was the worst-hit region at 35.7pc, followed by Southampton (34.3pc) and Peterborough, where around a third of businesses (32.8pc) have had to resort to their overdraft to survive.
RegionCompanies in overdraft at the end of the month (pc)
Plymouth35.7pc
Southampton34.3pc
Peterborough32.8pc
Shrewsbury31.1pc
Preston29.7pc
Stoke-on-Trent27.4pc
Manchester26.5pc
Bristol26.4pc
Milton Keynes26.1pc
York26pc
>See also: What are the best alternatives to a business overdraft?
Food and drink makers (34.7pc), product manufacturers (33.3pc) and farmers (32.6pc) have fared the worst over that 11-month period. This suggests that sectors investing large amounts upfront are suffering more.
IndustryCompanies in overdraft at end of month by industry (pc)
Food and drink manufacturers34.7pc
Product manufacturers33.3pc
Farmers (agriculture)32.6pc
Post and telecommunications31.7pc
Motor sales and repair31.3pc
Retail and trade30.8pc
Land transport30.4pc
Hotels and restaurants30pc
Construction29.5pc
Travel agents29pc
Last month, research from the Federation of Small Businesses (FSB) found that a growing proportion of finance applications (37pc) were being driven by
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Small businesses using loans to manage cashflow, instead of investing
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Small businesses are mostly taking out loans to manage their cashflow rather than investing in their companies, according to research.
Almost 40 per cent of small businesses that borrowed money in the last quarter of 2019 used cash to keep going rather than invest in their firms, says the Federation of Small Businesses.
This compared with 23 per cent using finance to update equipment, 16 per cent to expand their business or just 2 per cent for hiring staff.
>See also: Small businesses spend hour and a half each day chasing late payments
That small business is using external finance to cover outstanding invoices highlights the late payment crisis, says the FSB. The latest figures from Pay.UK show that the balance of outstanding late payments almost doubled to £23bn in 2019.
And applications for external finance dropped off in Q4 as the share of firms describing credit as “unaffordable” rose, despite more being offered at sub 4 per cent lending rates.
Mike Cherry, national chairman of FSB, said: “It’s troubling that so many external finance applications are driven by cashflow concerns. You wouldn’t dream of doing your weekly shop and telling the cashier that you’ll pay for it in
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12 of the best digital banking platforms for small business
by Anna Jordan • • 0 Comments
Originally written by Anna Jordan on Small Business
Digital banking platforms, also known as Authorised Payment Institutions (API) or e-money institutions/issuers, generally don’t consider themselves to be banks, but they promise something different to their traditional competitors.
These platforms all offer an alternative to traditional high street accounts, they are quick to set up and operate entirely from your smartphone where you can access all their digital banking services.
According to Finder, one in ten people in the UK have switched to a digital only bank like Monzo, Revolut or Starling for their personal banking. That said, nearly half (47pc) of those who use them keep less than £1,000 in a digital bank. There is hope for these challengers – two-thirds of respondents said they plan to convert fully to a digital bank in the future.
What’s interesting is that rather than holding onto cash, people often use personal mobile banking for secondary functions like spending abroad, transferring cash and budgeting apps.
Even if you’d like to keep the bulk of your cash with one of the traditional banks, having a digital account could see you well in one of these other key business areas.
Take a look at the digital banking platforms below and see
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Cashplus plans to lend £400m to small business from next year
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
EXCLUSIVE: Cashplus, one of Britain’s longest-established digital challenger banks, plans to lend £400m to small businesses over five years.
The fintech plans to have a 10pc market share of all new UK business accounts by 2024, compared with the 7pc share it already has today.
Cashplus applied to become a full-blown bank last year and expects to be authorized in Q1 2020 with the aim of becoming the specialist bank for small business. It already has around 75,000 business accounts.
>See also: Co-operative Bank to revolutionise small business banking offer
Unusually for a challenger bank, Cashplus has been in profit for the past eight years. In 2018-19 it generated £46.5m in turnover – a year-on-year increase of 19pc.
Should its banking licence be approved, Cashplus will fund its SME lending through the £500m of deposits it has built up since its launch in 2005.
Rich Wagner, chief executive of Cashplus, said: “The day we become a bank we will be able to unlock £400m of money and be able to lend that out to overlooked SMEs, which will almost supercharge our growth.”
Today, Cashplus has 250,00 customers, of which nearly one third are startups and entrepreneurs.
Since launch, Cashplus has expanded
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Co-operative Bank to revolutionise small business banking offer
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
EXCLUSIVE: The Co-operative Bank plans to expand its Co-op small business banking offer over the next year following its £15m grant funded by RBS.
Last month, the Co-op announced that increased its lending to small business customers for the first time in six years as it seeks to cast off its past problems.
The bank is matching the £15m Banking Competition Remedies grant with £17m of its own money.
See also: Nationwide wins £50m prize to help boost small business banking
The bank is the UK’s seventh biggest provider of loans to small businesses but put the brakes on lending in 2013 after discovering a £1.5bn hole in its finances that threatened its survival.
Donald Kerr, managing director of SME banking, told Small Business that the bank will:
Put a small-business focused relationship manager back into branches
Introduce same-day business bank account opening next year
Modernise its online banking platform, making it much easier for SMEs to integrate online accounting packages
Launch a mobile app for business customers next year
Introduce its own-brand accountancy package in partnership with a Manchester-based fintech
Offer a three-month cash flow facility based on transaction history
This is in addition to offering 30 months’ free banking to new customers in
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Government mulls small business funds to limit impact of no-deal Brexit
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
The Government is mulling setting up funds to ensure that small and medium-sized businesses have enough access to credit to weather a no-deal Brexit.
Business secretary Andrea Leadsom; Michael Gove, the minister in charge of no-deal preparations; and City minister John Glen are expected to meet senior bankers in Westminster on Thursday to discuss limiting the impact of a hard Brexit on small businesses, according to the Financial Times.
Read: 70% of businesses put investment on hold because of Brexit uncertainty
The Government is concerned about banks cutting lending to small business after the UK is due to leave the EU on October 31, according to one person briefed on the meeting agenda.
However, lenders are pushing for the Government to support companies that might be excluded from access to loans under banks’ standard risk criteria. They want the Government to extend the Enterprise Finance Guarantee on loans to businesses that do not have enough collateral to meet lenders’ normal requirements.
The Enterprise Finance Guarantee provides lenders with a Government-backed guarantee for up to 75pc of the outstanding balance of eligible facilities, potentially enabling a “no” credit decision from a lender to become a “yes”. It supports facilities