When you’re running your own business, it’s vital to spend time keeping track of your finances the money side of things is where many new businesses come unstuck. The key task is to monitor cash flow, but you also need to plan for contingencies, so that you aren’t totally floored if you hit a bad patch. The Internet has opened up new possibilities not just for handling money, but for making money too.
Finding A Good Bank Account
If you are operating as a self-employed sole trader, you may not need a business account, but you will almost certainly need one if you are going to borrow money. Shop around for the business account that will give you the most flexibility and the lowest charges. Internet banking may be attractive for the various added-value services it offers, such as allowing you to conduct credit enquiries online, receive regular updates of statements, and find new suppliers on the bank’s database, as
well as make all the usual banking transactions. Online banking can save time, but if you will be banking cash regularly you need to choose a bank that has a branch nearby.
As with all banking, it’s vital to keep good records. On bank statements, check that bank charges haven’t been changed without warning; that all transactions are included and correct; that all payments into your account have been cleared; and that the balance is correct.
Sources Of Money
While you may be able to get an overdraft facility from a bank, which is useful for tiding you over when cashflow is tight, you may find you’re unable to get a straightforward loan if you don’t have enough security in other words, you don’t have anything that can be redeemed against the loan if you default on your payments. lt’s inadvisable to offer your home as security against a loan because, if you fail, you risk losing the roof over your head. And if you have a mortgage, you may not own enough of your home to borrow against it anyway until you’ve paid off your mortgage you only own a percentage of the property. Start by contacting Business Link if you’re looking for funding.
Government Loan Scheme
Your bank may be able to offer you a loan under the government’s Small Firms Loan Guarantee Scheme, if it feels that your business is eligible and relatively risk-free. The government guarantee covers 75% of new loans. Loans start at £5,000 and can go up to £250,000.
Grants From Public Bodies
There are nearly 4,000 grants on offer in the UK each year. These are provided by all kinds of public bodies, ranging from local authorities and local and regional arts councils to central government and the European Union. Several publications give details of grants. These can be found in any good business reference library or bought from the Stationery Office, which has an online sales service, or try looking on the Internet for information is a good place to start.
The amount of a grant is dependent upon a variety of factors and you will certainly have to find a sum of money yourself, as a grant never pays the whole cost of a project. Although there appear to be many grants on offer, getting a grant may take considerable work. Companies called grant consultancies have sprung up to help applicants. There are various types of grant.
- A direct grant is a sum of money that is given to a business usually no more than 50% of a proposed project -and doesn’t have to be paid back.
- A soft loan is made available to businesses not eligible for commercial loans. It may be interest-free, long term, or offer other benefits. it has to be paid back eventually.
- A repayable grant is usually offered, interest-free, for special projects on the understanding that it will be repaid when the project succeeds, but not if the project fails.
- Support in kind may take the form of free training, advice, professional services such as research and development, trips abroad for export planning, or something else useful for your business.
The government encourages individuals and businesses to invest in small-to-medium-sized companies needing an injection of cash in order to grow.
The Inland Revenue gives tax relief to investors who provide venture capital. Nearly £23 billion has been invested in UK companies over the last 15 years. The British Venture Capital Association provides information.
Business angels are individuals who invest small amounts in companies in the early stages of development. The National Business Angels Network comes under the aegis of the British Venture Capital Association, which publishes a directory listing all current sources of business angel capital
It’s best to consult an independent business insurance broker or go direct to one or more insurance companies some offer small-business packages that can be tailored to your requirements. These are the main types of insurance.
Home contents insurance
All your working equipment must be covered and you must inform the insurer if you add any new equipment, otherwise a claim could be invalid.
Desirable if you advise or perform a service for clients and the quality of your work could substantially affect their business.
Important if you manufacture a product, no matter how modest, in case any member of the public is injured because your product is faulty.
Public liability and third party public liability
The first policy covers you against any injury to the public through your work or in your home. The second type of cover may be relevant if you subcontract any of your work to others who are deemed to be acting on your behalf.
Required by law if you employ even just one person, to cover you if an employee should be injured in the course of employment.
Business category car insurance
Check whether your car insurance covers self-employed business use. You will certainly have to pay higher premiums if the business use of your car involves using the car as a taxi, transporting high-priced goods for instance samples or stock or you carry valuable or hazardous equipment.
Private medical insurance
Usually offers the option of private medical treatment or, if you opt for NHS treatment, a cash sum to compensate for lost income.
This policy will pay you money if you are out of work-owing to an accident. Premiums can be quite high if you are in a high-risk occupation, such as the building trade.
Critical illness cover
Protection if you are ill and not able to earn money.
A popular policy for very small companies where the loss of one person through illness or injury can greatly damage the effectiveness of the company. The policy covers the cost of a temporary replacement employee.