Glasgow Chamber 11.05.11

240 views

Published on

Slides for presentation at BigSmall Business Event hosted by Glasgow Chamber of Commerce in May 2011

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
240
On SlideShare
0
From Embeds
0
Number of Embeds
5
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • More opportunities from our existing client bank to work on one off opportunites.
  • Glasgow Chamber 11.05.11

    1. 1. Glasgow Chamber of Commerce BigSmall Business Event How to approach your bank for funding / get the tax structure correct 11 th May 2011 Simon Murrison / Bruce Wilson
    2. 2. The Firm - Our Philosophy <ul><li>Our client base consists predominantly of owner managed businesses with challenging demands and changing requirements . We are committed to providing all our clients with the best professional and commercial services. </li></ul>
    3. 3. About me! <ul><ul><li>Qualified as CA in 1997 </li></ul></ul><ul><ul><li>Joined a 3 partner firm in 1999 & became partner in 2005 </li></ul></ul><ul><ul><li>Joined a multi-national firm in 2009 as partner </li></ul></ul><ul><ul><li>Returned to smaller sized firm in Jan 2011 </li></ul></ul><ul><ul><li>Entire career spent dealing with start up to medium sized entities </li></ul></ul>
    4. 4. How to Approach the bank for funding
    5. 5. How to Approach the bank for funding <ul><ul><li>Be prepared before you approach the bank </li></ul></ul>
    6. 6. How to Approach the bank for funding <ul><ul><li>Be prepared before you approach the bank </li></ul></ul><ul><ul><ul><li>Get your management accounts uptodate – need to demonstrate your trading history / understand trends. </li></ul></ul></ul><ul><ul><ul><li>Prepare profit and loss, balance sheet & cashflow projections for a minumum of 3 years ahead </li></ul></ul></ul><ul><ul><ul><li>Profit & loss / cashflow is not the same thing – key differences are timing & VAT </li></ul></ul></ul><ul><ul><ul><li>Have sound assumptions that your projection pack is based upon </li></ul></ul></ul>
    7. 7. How to Approach the bank for funding <ul><ul><li>Be prepared before you approach the bank </li></ul></ul><ul><ul><ul><li>Include commentary on </li></ul></ul></ul><ul><ul><ul><ul><li>your business </li></ul></ul></ul></ul><ul><ul><ul><ul><li>your expertise in the product / market </li></ul></ul></ul></ul><ul><ul><ul><ul><li>industry sector </li></ul></ul></ul></ul><ul><ul><ul><ul><li>your current market place </li></ul></ul></ul></ul><ul><ul><ul><ul><li>target market place </li></ul></ul></ul></ul><ul><ul><ul><ul><li>SWOT analysis </li></ul></ul></ul></ul><ul><ul><ul><li>Ensure you approach the correct bank for your sector </li></ul></ul></ul><ul><ul><li>All key points that your Accountant should be helping with. </li></ul></ul>
    8. 11. How to Approach the bank for funding <ul><ul><li>Test the numbers – the bank will </li></ul></ul><ul><ul><ul><li>Include sensitivity analysis </li></ul></ul></ul><ul><ul><ul><li>Consider seasonal fluctuations </li></ul></ul></ul><ul><ul><ul><li>Think about effect of changing the assumptions </li></ul></ul></ul><ul><ul><ul><li>Do the numbers stack up </li></ul></ul></ul>
    9. 12. How to Approach the bank for funding <ul><ul><li>Understand ‘bank talk’ </li></ul></ul><ul><ul><ul><li>Bank covenants – devil is in the detail (who reads them)? </li></ul></ul></ul><ul><ul><ul><li>EBITDA – Earnings Before Interest Tax Depreciation & Amortisation </li></ul></ul></ul><ul><ul><ul><li>Underlying cash generation of business before servicing of debt, tax & fixed asset write off </li></ul></ul></ul><ul><ul><ul><li>Measured against the cost of servicing the debt – interest cover </li></ul></ul></ul><ul><ul><ul><li>Allows bank to calculate head room for movement in interest rates </li></ul></ul></ul><ul><ul><ul><li>Not just financial measures </li></ul></ul></ul><ul><ul><ul><li>Reporting deadlines </li></ul></ul></ul><ul><ul><ul><ul><li>Year end </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Management accounts – 30 days after quarter end (EFG) </li></ul></ul></ul></ul><ul><ul><ul><li>Debt serviceability – how is it going to be repaid? </li></ul></ul></ul>
    10. 13. How to Approach the bank for funding <ul><ul><li>Understand ‘bank talk’ </li></ul></ul><ul><ul><ul><li>Security </li></ul></ul></ul><ul><ul><ul><ul><li>Property - max (65%) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cash cover – residential 190%, commercial 160% </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Rental yield needs to be good to build headroom if base rate goes up </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Value of debtor book </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Personal guarantee </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Floating charge – very hard to get as difficult for the bank to recover their losses (past bad experiences) </li></ul></ul></ul></ul><ul><ul><ul><li>Identify the funding gap & think through the type of funding most appropriate </li></ul></ul></ul><ul><ul><ul><ul><li>Standard Overdrafts – thing of the past </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Invoice finance </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Asset finance </li></ul></ul></ul></ul>
    11. 14. How to Approach the bank for funding <ul><ul><li>Understand why the bank might say no </li></ul></ul><ul><ul><ul><li>Why do you want to borrow the money? </li></ul></ul></ul><ul><ul><ul><li>Banks generally will not fund HMRC! </li></ul></ul></ul><ul><ul><ul><li>Your business plan & accounts </li></ul></ul></ul><ul><ul><ul><li>Your business cashflow, profitability and existing commitments </li></ul></ul></ul><ul><ul><ul><li>Any personal financial commitments that affect the business </li></ul></ul></ul><ul><ul><ul><li>How you have handled your finances in the past </li></ul></ul></ul><ul><ul><ul><li>Information held by credit agencies </li></ul></ul></ul><ul><ul><ul><li>Any security provided </li></ul></ul></ul>
    12. 15. How to Approach the bank for funding <ul><ul><li>Future reporting requirements </li></ul></ul><ul><ul><ul><li>Comparison of actual to forecasts </li></ul></ul></ul><ul><ul><ul><li>Progress on existing / new contracts </li></ul></ul></ul><ul><ul><ul><li>Revised cashflow forecasts </li></ul></ul></ul><ul><ul><ul><li>Major capital spending proposals </li></ul></ul></ul><ul><ul><ul><li>Yearly accounts & management accounts </li></ul></ul></ul><ul><ul><ul><li>Debtors & creditors information </li></ul></ul></ul><ul><ul><li>Ensure you address it before you proceed </li></ul></ul>
    13. 16. How to Approach the bank for funding <ul><ul><li>Show confidence </li></ul></ul><ul><ul><ul><li>If you don’t believe in your request then why should the bank fund it </li></ul></ul></ul><ul><ul><ul><li>Be prepared to show your commitment – if you are not prepare to then the bank will not do so either </li></ul></ul></ul><ul><ul><ul><li>Think about getting your accountant to present the numbers </li></ul></ul></ul><ul><ul><ul><li>When the client meets the bank the numbers should already have been in principle agreed </li></ul></ul></ul><ul><ul><ul><li>Client will in general then only talk about their product rather than finances </li></ul></ul></ul><ul><ul><ul><li>Client in comfort zone </li></ul></ul></ul>
    14. 17. How to Approach the bank for funding
    15. 18. Over to Bruce .....
    16. 19. Correct Vehicle for tax <ul><li>Don’t let the tax tail wag the commercial dog </li></ul><ul><li>Traditional structures: </li></ul><ul><ul><ul><li>Sole Trader </li></ul></ul></ul><ul><ul><ul><li>Partnership </li></ul></ul></ul><ul><ul><ul><li>Limited Liability partnership </li></ul></ul></ul><ul><ul><ul><li>Limited company </li></ul></ul></ul>
    17. 20. Analysis of Tax effects <ul><li>Sole trader, partnership and LLP all treated the same </li></ul><ul><li>Individual pays tax at </li></ul><ul><ul><li>20% on the first £35K (PY £37.4K) </li></ul></ul><ul><ul><li>40% up to £150K </li></ul></ul><ul><ul><li>50% thereafter </li></ul></ul><ul><ul><li>Remember NIC! </li></ul></ul>
    18. 21. Analysis of Tax effects <ul><li>Limited company pays tax at 20% up to £300K </li></ul><ul><li>Extraction leads to possible double taxation </li></ul><ul><li>Use Dividends – No NIC, watch reserves! </li></ul><ul><li>Husband & Wife situations </li></ul><ul><li>Settlements </li></ul><ul><li>IR35 – disguised employment </li></ul>
    19. 22. Benefits and Pitfalls <ul><li>Incorporation can benefit individual from Goodwill at 10%, live free of personal taxation? </li></ul><ul><li>Stop advance tax payments and reduce tax with overlap relief </li></ul><ul><li>Full Incorporation is a change, bank, PAYE customers, creditors etc </li></ul><ul><li>National Minimum Wage </li></ul><ul><li>Increased compliance costs </li></ul>
    20. 23. Email – simon@gillilandca.com - bruce.wilson@gillilandca.com – (email for copy of slides!!) Tel - 0141 226 8484 / 0141 226 8484 Linkedin – Simon Murrison / Bruce Wilson Twitter - @simonmurrison Check out our affinity scheme at – www.glasgowchamberofcommerce.com

    ×