Nicoll Financial Solutions Limited

Currently the high street banks are lending a total of £720bn to all UK businesses. A further £100bn is already committed to businesses of all types and is available to be used at the discretion of each business.

The BBA said: “We expect and are ready to increase lending over and above these amounts as the economy picks up. Banks will play their part in financing growth in UK. The fact that approval rates for applications received by banks have remained high despite the general deterioration in credit quality caused by the recession demonstrates this clearly.

“The high street banks understand the concern of smaller businesses. They are lending £54bn to such businesses. New lending of £500m is taking place each month to smaller businesses. Approval rates remain high here as well.

“Overall, small and medium sized enterprises (SMEs) should be confident banks will lend to viable business plans with a demonstrated ability to repay. We have been working closely with the Department for Business, Innovation and Skills to develop a number of commitments in areas that they, and the groups that represent businesses, would consider most helpful.”

As a result the high street banks will adopt the following principles when dealing with SMEs:

• Banks are happy for SMEs to bring their professional advisers with them to support them in their discussions with their business manager. (Acknowledging shadow directorship boundaries in the provision of advice)

• Banks will use either in house guides or industry-standard literature to provide guidance on the factors that determine pricing

• Banks will always inform customers of the time it will take for a lending decision to be taken, starting from the point when a full suite of information is provided to complete an application

• Banks will ensure they have fair and effective processes in place to review decisions to decline a lending request

• Wherever practical banks will provide proactive and clear feedback to SMEs when a decision has been taken to decline a borrowing request and what next steps they might take, for example contacting professional advisers for further advice and support

• Banks will work with SME representatives and with the Lending Code standards board to promote both these initiatives and the Lending Code itself.

British Bankers' Association chief executive Angela Knight said: "UK high street banks have capacity to lend responsibly to good quality businesses and individuals. The money is there to lend and the banks want to lend it.

"Across the industry application levels are down in all customer segments and sectors, reflecting the weak demand from businesses and households for credit. There are many reasons affecting demand, including uncertainty about the future and fears that the recovery is patchy. However, whatever the reason, the banks want businesses and individuals to know that they have capacity to lend responsibly and want to encourage them to come forward.

"These banks already provide the majority of funds for home loans and are still lending to small and medium sized firms. There is capacity within these banks to continue lending to banks responsibly - the industry wants to revive demand for credit and encourage businesses to come forward. Over the last two years, acceptance rates for business lending have remained broadly stable across these banks.

"The banks recognise that businesses need to be assured that they will get a fair hearing when they approach their bank for business finance. Businesses will need to come armed with the right information, sound business plans and evidence that the loan can be repaid without the business getting into financial trouble. To help this, the banks are reaffirming their commitment to supporting small businesses with a series of pledges and assistance.

"The banks recognise that the current economic climate is tough for businesses and individuals. Finance though is available and banks are committed to supporting households, businesses and the UK's economic recovery."

The commercial property industry fears a sharp rise in distressed asset sales that could damage a recovery in the market, according to a new survey. Oliver Gilmartin, senior economist at the Royal Institution of Chartered Surveyors (RICS), which conducted the survey, warned distressed asset sales are a "thunderous cloud which overhangs the market". In the UK, 42pc more property professionals fear a rise in distressed asset sales in the second quarter of 2010 than a fall, compared to a net balance of 14pc for the first quarter. The most severe increases are forecast in the US, Middle East and Ireland, where every member surveyed forecast a rise in distressed sales following the launch of the government's National Asset Management Agency (Nama).

Begbies Traynor, the corporate insolvency specialist, continues to expect UK companies going bust because of the recession. "There are lots of zombie businesses, which are effectively the walking dead and have no chance of actually coming back to life," said Ric Traynor, executive chairman. Most of the pain from the recession had yet to be felt, he added. Nevertheless, the number of corporate insolvencies in Begbies' second half to April 30 was relatively flat compared with the first half, the company said in its full-year trading update. As a result Shore Capital, its broker, cut its forecast for pre-tax profits excluding exceptionals in the year to April 2011 from £13.3m to £10.9m.

In a survey of over 1,400 Federation of Small Businesses members, only 18 per cent of businesses have applied for new credit, with 50 per cent of these successful in their application. As the state owned banks have been given new lending targets by the Government the survey also revealed that just over a third of businesses (36%) had their application refused with 12 per cent yet to find out the bank's decision.

For businesses with existing finance, the survey also showed that 16 per cent had seen an increase in the cost over the last two months. Of these, 44 per cent saw between a two and three per cent rise, but more worryingly 12 per cent saw interest rates hiked anywhere between 10 and 14 per cent, at a time when the base interest rate is at an all time low. Only one per cent of respondents had seen the cost decrease.

The FSB has been critical for some time now, of the banks and their lending criteria and believes that the introduction of the Small Business Credit Adjudicator announced in the Budget will help to ensure small firms are given a fair deal and a right of appeal against decisions made by big banks.

John Walker, National Chairman of the Federation of Small Businesses said:

"Trust needs to be restored between banks, bank managers and business as credit conditions remain tight for small firms. We hope the next government - of whatever hue - will look at the best way to address the issues in the banking system to ensure that the UK has the necessary financing structures to support further economic recovery.

"Small businesses continue to bear the brunt of the financial crisis and are being penalised with extortionately high interest rates. At any time, not least when the economy is on such a fragile path out of recession, a 10 to 14 per cent increase in costs is highly unreasonable."

The recent recovery in the property market has been given further impetus, after Alistair Darling confirmed the introduction of a new stamp duty holiday for first time buyers in yesterday's Budget. For the next two years, homebuyers taking their first step onto the property ladder will pay no stamp duty on properties worth up to £250,000 in a move the Chancellor claimed will benefit nine out of ten first time buyers. A rise in the duty payable on properties worth more than £1 million to 5% from April next year will help fund the initiative. Amongst the other announcements made by the Chancellor, savers received some much needed support, after it was revealed that the ISA allowance is to increase each year in line with inflation. The current limits are already set to rise for all savers to £10,200 from 6 April this year. The rumours were also confirmed that basic bank accounts are to be made available to everyone in the UK, a move expected to be of benefit to more than one million people over the next five years. In terms of the banking industry, Mr Darling said the Treasury had already received more than £8 billion in return for the support it had provided in the form of bail outs, while a further £2 billion had been raised by the 50% tax on bankers' bonuses. The introduction of an internationally co-ordinated tax on banks also received the Chancellor's backing.

In a blow to alpha males all over the UK, one of the country’s main debt charities, the Consumer Credit Counselling Service (CCCS) has discovered that men are more likely to become insolvent than women.

Releasing its insolvency statistics by gender, which revealed higher rates of bankruptcy and Individual Voluntary Arrangement recommendations for men than women, CCCS disclosed that last year, of those it recommended an IVAto, 55.4 percent were men while 51.4 percent were women.

And for those who cast doubt on the charity’s own figures, the existence of an insolvency gender divide is supported by figures obtained from the Insolvency Service.

Statistics from 2000 to 2008 showed that men have always taken out more IVA's or gone bankrupt more than women. In 2008, the most recent available figures by gender, 23,173 women went bankrupt compared to 37,972 men - marking an increase of over 50 percent.

In 2008 17,300 women took out an IVA, four thousand less than the 21,318 men who did.

The levels of debt for CCCS clients give an indication as to why there are higher numbers of insolvency among men. While couples have more debt than single people, on average owing just over £30,000, single men owe on average £19,830, which is 17 percent more than the average of £16,937 for single women.

Commenting on the findings, CCCS spokeswoman Frances Walker said: “This may be the one equality which women may not want to aspire to. Whatever sex you are, I would urge anyone worried about their debt to seek help as soon as possible.”

The base rate of interest will remain at 0.5 per cent for at least another month, meaning the measure has now spent a year at this record low. The Bank of England's Monetary Policy Committee (MPC) announced the decision at noon yesterday, following its monthly meeting. The MPC last cut the base rate in March last year, when it was halved from 1% to 0.5%. There is currently some debate over when an increase will be implemented. Some analysts believe that a rise is probable later this year, while others have predicted a freeze at 0.5% until at least 2011. It was also announced that no more money would be injected into the economy through the Bank's programme of quantitative easing. The most recent change in the size of that programme was an increase of £25 billion to a total of £200 billion on 5 November 2009. Minutes of the meeting will be released on 19 March, while the next decision will be announced on 8 April. "With inflation hopefully peaking and house prices reining back, there is little evidence to support an increase to the interest rate. An extended period of low interest rates is now looking more and more likely, with an extension to quantitative easing a better bet than a withdrawal of the recent monetary stimulus," said Robert Sinclair, director of the Association of Mortgage Intermediaries.

FSB and ICM survey shows that three quarters of businesses would grow their business if the tax regime was easier to understand.

Research carried out by the FSB and ICM of over 1,600 small businesses showed that 75% of small businesses believe that they would be able to grow their business if the UK tax system was simplified.

Over a third (34%) of businesses surveyed said they found income tax the most difficult issue to deal with, while 52% citied taxable allowances - the amount a person is taxed on - hardest to get to grips with. Over half (52%) said VAT is the easiest type of taxation to understand.

Many businesses do not feel confident dealing with tax issues, with 66% employing professional help. Half of businesses spend less than two hours per week on fulfilling their tax responsibilities, but for one in 10 it takes up more than six hours of their time.

John Wright, National Chairman of the Federation of Small Businesses said: "The Government must recognise how important small businesses are to strengthening economic recovery. As our survey findings show, three in four would grow their business if the tax system was more simple to understand. The potential investment and jobs which could be created through such a move would provide the economy with the boost it needs to sustain recovery.

"As we head towards a General Election the message from small businesses is clear: the incoming Government must think small first and get conditions right for entrepreneurs and small businesses to thrive."

It is difficult to run a business at the best of times. But, as many accountants have recently warned, the 18 months immediately following a return to economic growth is a particularly dangerous period. Many firms find themselves spread too thin, and poorly equipped to negotiate the new financial terrain that a recovery presents. At the same time, suppliers will begin to tighten their terms and chase debts more aggressively.

Even the most profitable firms can find themselves endangered by apparently unremarkable circumstances. Awareness is vital if you are to avoid this unfortunate fate. So what are some of the most common reasons for business failure?

1. Cashflow management

Poor cashflow management is the primary reason for a vast proportion of business failures. Many profitable companies find that they are, for all practical purposes, insolvent – simply because of uneven cashflow. Your year-end profit and loss sheets are virtually irrelevant here; the key is to have enough cash coming in to meet your necessary expenditure on a month-by-month basis.

Efficient cashflow management relies on you spreading out your expenditure as much as possible, and ensuring that customer invoices are settled in a timely manner. You should decide on payment terms and uphold them strictly as far as possible; these terms might be payment on receipt, or you might give your customers 30 days to settle their accounts. Your choice will depend, to a great extent, on the nature of the industry in which you operate.

You may also wish to investigate invoice finance products. These facilities mean that you can borrow up to 90 per cent of the face value of your invoices within as little as 24 hours. This type of lending is also valuable because your invoice finance lender can take on the task of chasing payment for you. This can all be done entirely transparently, meaning that your clients need never know you have made use of such a facility.

2. Lack of focus

Another common reason for business failure is so-called ‘scope creep’. This is a major problem in project management, but it extends to organisations as a whole.

Many firms spread themselves too thin. Presuming that operating in a large number of markets will increase their potential turnover, some business managers commit resources in too many places and on too many projects. In many cases this means that firms enter markets of which they have little or no experience, while committing less time and money to their core business.

There is nothing wrong with expanding into new markets. However, you should never enter into a new venture without the necessary expertise and resources, or without carrying out adequate market research. You should also think carefully before you commit to new projects at the expense of your core business.

3. Tax bills

Inability to pay a tax bill is another remarkably common reason for business failure. HM Revenue and Customs will aggressively chase firms that repeatedly fail to settle their tax bills, and they will eventually petition for insolvency.

If you are an employer it is vital that you keep on top of your PAYE payments. Do not get trapped into thinking that you can spend employee deductions now and make up the difference at the end of your PAYE period – on that route lies disaster.

If you are having difficulty paying your tax bill you should contact HMRC immediately. You may qualify for the Time To Pay Scheme, which offers firms extra time if settling a tax bill would cause them significant financial problems. You should note, though, that HMRC appears to be winding the Time To Pay Scheme down and, as such, they may be less receptive to requests for help.

4. Lack of insurance

Sufficient business insurance is vital for the stability of any business. Aside from the fact that many firms have a legal responsibility to get insured, underinsured businesses run the risk of falling prey to cripplingly expensive compensation claims or repair bills in the event of trouble.

For example, a flood in your premises could damage all your fixtures and fittings, leaving you unable to open for business and with a large bill for repairs. Without the insurance to cover the cost, a new business would almost certainly be in trouble.

If you are employer you have an obligation to take out employers liability insurance. This will help to protect you against claims arising from injury or illness suffered by an employee in the course of their work.

Even sole traders should seriously consider taking out insurance. If you visit a client’s premises, or if they visit yours, you should invest in public liability insurance. This will pay out in the event of injury or damage to such an individual or their property. Claims arising from incidents of this sort can be easily large enough to bankrupt a small firm, and it is therefore vital that you are properly protected.

5. Reliance on small number of customers

Finally, a large number of businesses fail because they are over-reliant on a very small number of clients. It takes just one unexpected closure to result in significant financial hardship. Short-term future earnings can be massively reduced, and invoices for completed work can go unpaid.

While maintaining caution about spreading yourself too thin, as explained above, you should try not to rely on a very small client base. If you deal with a very few clients, or if a small number make up the bulk of your turnover, you should begin scouting for new work.

Business failure can be quick and unexpected. However, the bulk of failures result from poor management or a lack of forethought. Make sure that you are aware of the major risks facing your firm and you can help ensure that you are in the best possible position to avoid them.

Cash starved businesses fall prey to false promises

Speaking at the Great Southern Business Money Commercial Finance Dinner, Business Money editor, Robert Lefroy, alerted almost 300 professional guests to the danger of their clients dealing with unknown parties offering to secure business finance. “There is a high probability of parting with fees yet receiving nothing,” he said.

“A business owner desperate for funding for their business might receive a telesales call offering them finance and proceed down a path that leads to disappointment. We have received reports from across the country and the methods employed have a common theme. The business owner first signs a registration agreement and parts with £395. This is followed by an agreement requiring a commitment fee of £1,500. A week or so later a valuation appointment is made and a valuation fee of £1,800 is payable though many have commented that the valuer appeared to lack any professional qualifications.

“This is followed by an ever lengthening list of requirements, maybe more payments to be made, but the one common theme to the many complaints reported to the Fraud Intelligence Unit at the National Association of Commercial Finance Brokers (NACFB) is that no funds are forthcoming. Many business owners have parted with close to £5,000 and for nothing.

“When seeking business finance use only brokers that are members of the NACFB,” he warned. “The association has a code of conduct and enjoys the support of most leading business lenders in the United Kingdom.”