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UK startups receive £941 million in government support! Three ways to stretch your business loan

The UK Government has provided startup loans to a total of 100,000 small businesses. This marks a major milestone for the scheme and means that the government has given more than £941 million in support.

Each startup that applies to the scheme is eligible to receive up to £25,000 to help their business grow. Here, we take a look at 3 ways to make the most of your small business loan and stretch £25k to much more!

Use a business credit card

Business credit cards are a godsend to any startup owner. Yet, many budding entrepreneurs fail to use them. Using a business credit card to make purchases will help you to separate your business spending from your personal spending. This is a good way to manage your loan and avoid accidentally covering personal expenses with your startup fund.

Business credit cards also come with a range of budget-stretching benefits such as: lower interest rates, higher credit limits, longer interest-free periods and discounts for early repayments. It is also possible to build company credit by using a business credit card which could help down the line.

Focus on purchases that will make money

At first, it can be tricky to dictate which purchases should be made first with your startup loan. In general, it is best to focus on items that will generate revenue for your business so that you can increase the budget that you have to spend.

It is good practice to think of every item that you buy with your loan as an investment. Will the investment generate good returns for the initial cost? If not, it is probably wise to leave this until you have more money to spend.

For example, it is better to invest the loan on creating new products to sell rather than purchasing a swanky new office. The office can wait until you’ve made some revenue! Learning how to prioritise your spending can massively help towards making your loan go further.

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Use what you already have

One of the best ways to stretch your startup budget is to make the most of resources and connections that you already have. This means harnessing the skills of friends, relatives, colleagues and business partners to save spending money elsewhere.

If you ask around, you will be surprised at what people around you can bring to the table. You may know people who are great at social media marketing, financial planning or even selling products. At the beginning, it’s good to make the most of anything that you can get for free! Of course, you can’t expect people to provide free service forever. However, there is never any harm in asking when you are starting out.

Conclusion

The UK government-backed startup loan is a great way to get your business off the ground! However, taking out a loan on its own may not provide all of the support that you need. To help stretch your budget try using a business credit card, prioritising your purchases and using free resources where you can.

By Alice Cumming

Source: Business Leader

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How to start a business with no funding

Starting a business with no funding is challenging, but it’s possible. With the right approach and some hard work, you can get your business up and running quickly.

Can I start a business with no money?
In theory, anyone can start a business with no money, and many, many entrepreneurs have done exactly that.

Typically, there are two key parts to successfully launching;

  • Create a business that requires little to no upfront costs
  • Create a clear plan for acquiring paying customers quickly

This will help avoid any cashflow issues and limit any initial risks.

What is the easiest business to start with no money?

The easiest business to start with no money will depend on your skills and resources.

If you’re a skilled writer, graphic designer or web developer, you could offer your services to clients on a freelance basis. This allows you to work to your own schedule and build a client base without having to invest in a costly physical office or staff.

Another option is to start a business that uses your car or even a spare room in your home, to create income. For example, you could start a ride-sharing business or rent out an extra bedroom to paying guests.

What do I need to start my own business?

Once you have your business idea, you will need to take a few important steps.

Firstly, decide on the business structure you would like to use, and register your business. In the UK, the most common business structures are a sole trader, a partnership, and a limited company. Each structure has its own legal and tax implications, so it is important to choose the right one for your business.

Sole trader
As a sole trader, you will be “self employed”, this means you’re solely responsible for all legal requirements of the business. It doesn’t mean you need to work alone, however, because sole traders can also employ staff.

You will need to register with HM Revenue & Customs (HMRC) when you first launch your business and file an annual self-assessment tax return.

You will need to pay income tax and national insurance based on your profits, and crucially, you are responsible (and liable to pay back) any debts accrued by the business.

Partnership
In a partnership business structure, each partner shares responsibility for managing the company, full liability and any profits generated by the business. One partner, known as the nominated partner, will be responsible for the tax returns and bookkeeping of the company.

A partner could be an individual or a limited company for example, because they also count as a legal person.

In an LLP (Limited Liability Partnership), two (or more) partners are responsible for filing the company accounts. The business structure has more similarities to a limited company, in that partners are limited in terms of their liabilities, protecting their assets. Liability is limited to any monies they have invested in the company and any personal loan guarantees from generating funds to start or maintain the business.

Limited company
Creating a limited company involves incorporating your business with companies house, and paying an application fee.

While this is not ideal for people considering starting a business with no money, it has some longer term benefits which should be considered.

The liability of directors and shareholders (meaning any owners of company stock) is limited to any money they originally invested in the business. Your personal assets and estate are not considered part of the business. That means they won’t be used to offset any debts that may need to be recovered in the future, should any issues arise.

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What if I need investment in my new business?

Getting direct investment
To get direct investment to start or grow a small business in the UK, you will need to create a business plan that outlines the key details of your business, including its products or services, target market, financial projections, and growth potential.

This will help you to clearly communicate your vision to potential investors and convince them to invest.

Next, you will need to identify potential investors and reach out to them to pitch your business idea.

This can be done through networking events, online platforms, or by contacting investors directly. You will want to make sure that the investors you approach are a good fit for your business and have the resources and expertise to help you succeed.

Once you have identified potential investors, you will need to negotiate the terms of the investment, including the amount of funding being offered, the equity stake being given up, and the rights and responsibilities of the investors and the business.

It’s important to carefully consider these terms and seek the advice of a legal professional before agreeing to any investment.

EIS and SEIS funding
The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) are UK government programs designed to help small, high-risk companies raise capital by offering tax relief to investors who invest in these companies.

Under the EIS and SEIS, investors can receive tax relief on investments they make in qualifying companies. This means that investors can reduce the amount of income tax they owe on their investment, making it more attractive to invest in high-risk companies.

To qualify for EIS or SEIS funding, a company must be a small, unlisted trading company that is not a subsidiary of another company.
The company must also be based in the UK and must not have been trading for more than 7 years.

If a company qualifies for EIS or SEIS funding, it can issue shares to investors and offer them tax relief on their investment.

The amount of tax relief an investor can receive depends on the type of investment and the amount invested;

  • EIS investments – investors can receive up to 30% of their investment in tax relief
  • SEIS investments – investors can receive up to 50% of their investment in tax relief

Getting a business loan
If you need a small amount to get your business started, a loan might be a viable option, rather than giving up any equity to raise funds.

Before applying for a business loan, you will need to consider your options carefully. Think about how much you would like to borrow, how this will be paid back and how long you’d like to borrow for.

You can find out how much you can borrow via a comparison site, broker or directly via a lender or high street bank. Always make sure you compare loan providers to find the best rates before applying.

If your application is approved, the lender will give you the money and you’ll be responsible for repaying the loan according to the terms you agreed on. This will involve making regular payments and paying interest on the loan.

By Laura Rettie

Source: Finance

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Significant Rise in UK SMEs Borrowing Money Expected in 2023

The majority of UK SMEs (88%) plan to lean on business finance and credit this year according to new research carried out by solution-led fintech provider Nucleus Commercial Finance (NCF).

As the economic situation continues to challenge the outlook and stability of UK SMEs, it is revealed that only 12% of SMEs say they have no plans to borrow any money over the next 12 months – this rises to 29% when including sole traders and micro businesses. With interest rates still at record high levels, this is going to place a real financial burden on UK businesses.

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The expected borrowing is not, however, solely to patch holes. The reason most commonly cited by small and medium sized businesses is to enable them to seize growth opportunities (38%). More than a third stated that they plan to borrow in order to help employees with the rising cost of living (34%). A similar number said that borrowing would be driven by a determination to use it to make the business more environmentally sustainable.

Rising costs and financial stress are still having an impact, however. A third (33%) of small and medium sized businesses expect to use business finance to cover unavoidable rising overheads, while one in five (20%) are likely to do so in order to pay off existing debt.

Source: Fintech Finance News

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4 reasons to source business funding in 2023

There’s no doubt that it’s been a difficult few years, with pandemics, conflicts and the cost of living crisis all contributing to unease and uncertainty. Whether your business has been directly affected or not, you might have put off raising finance or had ambitions dashed by unpredictable circumstances. Caution is wise, but that doesn’t mean you should abandon all your growth plans until things settle down. There are still plenty of good reasons to source business funding in 2023.

Things are looking up(ish)

Contrary to predictions, the UK benefited from a World Cup boost to GDP in November, which may have helped to narrowly avoid a recession. Okay, so that growth might have only been 0.1 per cent, but it shows that there’s always scope for optimism. On top of that, after a period of high inactivity, PWC predicts that 300,000 UK workers could rejoin the labour market in 2023, giving you the opportunity to invest in key talent and plug skills gaps in your business.

There have never been more funding options

Crowdfunding, credit cards, invoice finance, government grants – there have never been more ways to access finance and there’s something out there to suit every type and size of business. In fact, alternative finance options are seeing growth even as other funding sources dry up. According to UK Finance’s Business Finance Review of Q3 2022, levels of invoice finance and asset-based lending surpassed those reported in Q1 2020 following nine quarters of consecutive growth. And businesses that use these types of alternative finance have seen a 14 per cent increase in sales compared to the first three quarters of 2021.

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There’s no time like the present

If you have big ambitions but you’re waiting for things to calm down, you could be waiting a long time. We have a tendency to assume there will come a perfect time to put our plans into action, but the truth is that those perfect moments rarely, if ever, come about. That’s not to say we’re not going through an especially challenging period, but if you have access to finance and growth plans to action, why not just go for it? You might need to adjust your expectations or reign things in, but maybe, just maybe, the right time is now. And having seen how global events can have big consequences for small businesses, you could use this knowledge to invest in strategies that make your business more resilient to future challenges, whether that’s bringing your supply chains closer to home or investing in the latest technology to drive efficiency and get ahead of the competition.

You can power change

Instead of being at the mercy of uncertainty, why not use your entrepreneurial skills to change things for the better? Whether you make amazing coffee or help people find better deals, transform lives or just make someone’s life a little bit easier with a nifty solution, your business has the power to help others cope with challenging times. Raising finance can help to grow your business and reach even more people.

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89% of SMEs intending to borrow over the next year to help them stay afloat

Demand from SMEs for lending is set to increase in the next 12 months, as 89% of businesses look to borrow to stay afloat, cover overheads or refinance existing debt.

That’s according to a recent survey from Allica Bank, which polled 150 established businesses (those with 10-100 employees) on their outlook for 2023 – a year that looks set to be dogged by recession, inflation and rising interest rates. More than two in five (43%) said they will need to borrow simply to survive, while nearly the same proportion (37%) are doing so to refinance existing debt.

It follows the British Business Bank reporting that while total debt held by SMEs reached new highs during the pandemic in 2020, loan repayments have been becoming a smaller share of business cashflows as turnovers have started to recover.

Allica Bank claims that the lack of information available to businesses about financial products makes this trend especially concerning, with 10% of respondents saying they needed more clarity about borrowing and 17% saying they wanted a greater selection of loan products to choose from.

The bank says this could lead to a growing number of businesses becoming over-leveraged, or missing opportunities to support growth. Recessions often lead to a higher proportion of defaults on business loans, while the Coronavirus Business Interruption Loans (CBILS) is already seeing an 8% default rate, amounting to over £6 billion, according to the government’s latest report.

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Conrad Ford, Chief Product Officer at Allica Bank, says it’s vital for the UK economy that businesses are made aware of the products available to them and get the expert attention they deserve: “It’s the responsibility of banks to give businesses the best chance of surviving and thriving through this recession by ensuring they can make informed choices.

“This needs to be backed up with fast and clear responses to loan applications, so that businesses aren’t waiting weeks for an answer. While banks should actually look individually at each application and assess each business on their own merits and opportunities.

“Fewer and fewer banks still offer their customers a proper relationship manager – someone that can walk business owners through their available options and help them make an application. At Allica Bank, we make relationship managers a core part of our offering for our business customers because we know how valuable their expertise can be. Especially as the economy is expected to enter recession.

“We also recommend businesses consider speaking to their accountant or a commercial finance broker for support when looking at their finance options.”

By James Cook

Source: Business Leader

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Sustainability a high priority for small businesses, but they urgently need more support

A huge opportunity exists to support small businesses to become more sustainable as they face mounting economic challenges, according to a new report from Oxford Brookes Business School and Small Business Britain.

In findings that point to the ambition amongst small firms to take action on climate change, 71% of small businesses said they intend to reduce their carbon emissions over the next two years, but many feel that barriers such as lack of finance (41%) and time pressures (30%) are holding them back.

The research, which was gathered earlier this year, shows that over two thirds (69%) of British small firms were already actively lowering their carbon emissions and over half (56%) were taking action to optimise energy usage and reduce waste in their business.

Experts behind the report believe that escalating energy prices and growing economic uncertainty is likely to have strengthened this desire among small businesses. They call for greater support and collaboration to guide small businesses on the journey towards net zero, which would not only have positive impact on the environment, but open up growth opportunities and help insulate small firms from further economic shocks and uncertainty.

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“The challenge of climate change looms large, and the conversation around business sustainability is only going to get bigger and more critical. This is going to increasingly be the focus for all business as we continue through 2023 into the next decade and beyond,” said Michelle Ovens CBE, founder of Small Business Britain.

“Entrepreneurs are natural changemakers, and they have the ability to make real impact quickly. With 99% of the UK economy made up by small businesses, they play a vital role in helping the UK achieve net zero. This passion needs to be supported and directed, however, to ensure that it converts to action that has impact.”

Despite clear intentions from entrepreneurs to incorporate sustainability into their business, 41% feel that access to finance is holding them back and almost a third (30%), do not feel they have the time to prioritise green switches. Furthermore, over half (54%) either do not understand or are not aware of the government’s net zero commitments.

To help address this, Small Business Britain launched the Small Business Sustainability Basics Programme earlier this year, in partnership with Oxford Brookes Business School. This is a free six-week course designed to help firms kickstart their sustainability journey, which has now been completed by over 1300 small firms across the country.

“Small businesses play a big role in achieving our Net Zero targets, so it’s incredibly encouraging that our research shows many are already taking action or want to do more,” said Dr Lauren Tuckerman, Senior Lecturer at Oxford Brookes Business School and co-author of the report Small Business Sustainability: Insights and Implications.

“In this report, there are not only recommendations for small businesses, but also for policymakers, intermediary organisations and bigger businesses too, so that we can all work together to achieve our sustainability goals. Sustainability is not a cherry on the top of a good business, it is the strong foundation for them to thrive, and small businesses are ideally placed to show that.”

Source: Ealing Times

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SMEs Increasingly Concerned About Possible Recession

Small business owners are concerned about the possibility of a recession, according to iwoca’s latest quarterly SME Expert Index.

With both the cost of living and of doing business climbing, over three quarters of brokers surveyed (77 per cent) say SMEs are worried about the possibility of a recession. By contrast, fewer than seven per cent of brokers reported their small business clients as ‘unconcerned’.

iwoca’s Q2 2022 SME Expert Index is based on insight from UK brokers who collectively submitted over 1350 applications for unsecured finance on behalf of their SME clients in June.

Demand for finance increases as small business owners contend with rising inflation
As small businesses face mounting economic uncertainty, their demand for finance has risen sharply. Almost half of brokers (46 per cent) submitted more loan applications for small business financing in the last month compared to the one previous – a continuation of an upwards trend since the end of last year, with 28 per cent citing the same in Q4 2021, and 34 per cent reporting increased loan demand in Q1 2022.

In addition, the latest SME Expert Index saw 0 per cent of brokers reporting significantly fewer applications.

The survey also reveals that small businesses are looking for larger loans in light of the turbulent economic forecast. Over one in eight brokers (13 per cent) identified £200,000+ loans as most sought after for small businesses, the highest proportion since the Index was first released. Looking back at this trend, demand for loans valued above £200,000 has steadily increased since iwoca’s first Index in Q1 2021 when only four per cent of brokers reported these larger loans as the most commonly requested.

To meet this growing appetite for high value loans in the small business sector, iwoca recently announced that it is more than doubling the maximum size of its core lending product, Flexi-Loan, allowing small business owners to access business loans up to £500,000, up from a previous lending cap of £200,000.

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Managing cash flow a key priority amidst the economic storm
This heightened demand for financing, and larger amounts of it, suggests small businesses are gearing up for financial strain: in particular, cash flow issues. Over a third of brokers (37 per cent) reported managing day-to-day cash flow as the most common loan purpose for SMEs. This represents an increase of six percentage points since last quarter.

Nonetheless, as in Q1 2022, brokers report ‘growing the business’ as the most common reason for SMEs business owners to apply for finance, although it’s down by three percentage points since Q1. So, whilst managing day-to-day cash flow is becoming more important, small businesses are continuing to seek loans to finance broader growth ambitions.

Steven Scoufarides, head of broker channel at iwoca , said: “The current economic outlook for small businesses is precarious – we are seeing signs of an increasing number of SMEs searching for finance solutions to manage their cash flow and brace for the potential of a recession. But, as they’ve proven time and time again, small businesses are resilient and will shield themselves against this economic threat in every way they can; encouragingly, it looks like most are still seeking finance to grow their businesses, rather than to holster it up. At iwoca, we’re working hard to adapt to small businesses’ needs, which is why we’re now offering the higher-value loans up to £500,000.”

Leanne Barry, broker at LB Finance Solutions Ltd, added: “We have definitely been receiving more applications from smaller businesses over the last two months since the Recovery loan scheme came to an end. This is mainly from businesses that either did not manage to source any government backed funding, or indeed have already used any funding they received for cash flow and are now needing further funding to stay afloat.”

By Nathan Gore

Source: The Fintech Times

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Lack of available funding holds back a fifth of UK SMEs

Nearly a fifth (19%) of UK SMEs have missed a new opportunity in the past 12 months due to a lack of available funding, according to SME specialist bank Aldermore

The bank’s latest Future Attitudes study shows medium-sized businesses are worst hit, with over a quarter (28%) saying they have been affected.

The report, which surveyed over a thousand business decision-makers across the UK, found that those impacted are missing out on income worth an average of £76,888 each year.

Regionally, businesses based in London are losing out on the most additional income due to missed business opportunities, £135,791 on average annually.

This is followed by those based in Wales, Scotland and Northern Ireland (£67,380 per year).

Lack of funding poses problems for those SMEs focusing on scaling up. Achieving growth is the top business objective for almost two fifths (37%) of SMEs, while almost a quarter (24%) are prioritising developing and expanding their products and services. Additionally, just over a fifth (21%) are concentrating on expanding in the UK.

Furthermore, business owners are apprehensive about not being able to innovate and grow.

A quarter (25%) of SMEs state that cash flow is their biggest business concern over the next 12 months.

Moreover, one in 10 (12%) feel keeping up with new technology is their main worry, while a sixth (15%) are anxious about attracting, retaining or upskilling staff.

Tim Boag, group managing director, business finance at Aldermore, said: “It’s concerning to see that almost a fifth of SMEs are missing out on opportunities as a result of financing issues. Small businesses need adequate cash to innovate, grow and keep up to date with the latest developments.

“That’s why it’s important that lenders understand and are responsive to the needs of SMEs.

“By providing specific solutions in a timely way, which meet business needs, we can start to address this problem and ensure SMEs – the lifeblood of our economy – continue to thrive in uncertain times.”

Written by Tom Seymour

Source: Asset Finance International

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Fintech firm urges SMEs to look beyond conventional bank funding

New analysis from ThinCats, the fintech lender to mid-sized small firms, shows that Manchester has a higher proportion of high-growth companies and businesses that are more likely to require funding during 2019 than the UK average.

ThinCats also discovered that businesses in Manchester have been quicker than most regions to look beyond the banks for funding since the financial crisis.

Almost two-thirds (64%) of Manchester-based SME loans were sourced through banks in 2007.

This figure has come down to 53% more recently, slightly below the UK average of 57%.

ThinCats is urging Manchester’s business owners to make sure they consider the increasing number of non-bank lenders when looking for funding in 2019.

Richard Lamb, director regional business development at ThinCats, said: “We analysed more than 200,000 businesses across the UK and found that the likelihood of Manchester businesses needing external funding in 2019 is significantly higher than the UK average.

“This may be to expand their teams, to help service new contracts, or to invest in new equipment.”

He added: “Manchester has proportionately more high growth companies compared to other parts of the UK.

“Unfortunately, these are exactly the types of companies that the high street banks struggle to fund.

“Half of businesses that are declined funding by their banks fail to look elsewhere. It is vital that Manchester’s entrepreneurs don’t give up at this stage.

“We estimate there are about 3,800 businesses in Manchester alone that we could help with funding.”

He said ThinCats has almost £1bn of capital from institutions and other long-term investors waiting to be deployed across the UK.

Further analysis by Thincats claims that Liverpool-based companies have been relatively slow to look beyond the banks for funding since the financial crisis.

It says that 78% of Liverpool-based SME loans were sourced through banks in 2007, and this figure has come down to 57% more recently, in line with the UK average.

Richard Lamb said: “There are around 1,900 SMEs in Liverpool, alone, that we could help with funding.”

Source: The Business Desk

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Alternative finance ‘becoming vital’ for SMEs in north

THE ability for small businesses in Northern Ireland to access alternative forms of finance has become a vital factor in their successful growth, the head of a Belfast accountancy firm insists.

Since the financial crash and credit crunch, the funding void left by traditional lenders has been filled by boutique funders and alternative finance, which can allow SMEs to access finance for a variety of different needs, from long term investment through to funding for short term working capital.

But according to Conor Walls, managing director at Exchange Accountants, the key to small firms securing successful alternative financing is to understand what their requirements are and to know what’s on offer, so that they can secure the best possible deal for their business.

With the continuous improvement in technology and the ever-growing popularity of online banking, banks and building societies have continued to close branches across Northern Ireland, and by the end of 2018 over 43 per cent of bank branches available in 2010 will have shut.

“As a result, businesses have had to adjust to the reality that accessing finance from traditional lenders has become much more difficult, and the ability for SMEs to access finance to grow their business is no longer a simple case of hoping the local bank manager likes the ‘cut of your jib’,” Walls says.

“Businesses can access alternative financing through a range of different forms, but most commonly it is secured via friends and family, peer-to-peer lending, angel investors, venture capital investors, crowd funding, equity finance, invoice financing and asset finance.

“Funders will often have key criteria which must be satisfied before any finance is provided, and borrowers can expect to be required to explain in detail what the growth potential of the business is and how the money is going to be used, as well as showing how they will be able to repay the borrowings and what security the borrowers can offer.”

He added: “The financial world is constantly evolving, and it’s no surprise we’ve seen local businesses embrace alternative finance.

“In recent months we’ve found ourselves working with clients to access alternative finance for a variety of needs, from loans in excess of £100,000 for long term investment through to funding for shorter term working capital requirements”, he added.

Funders will often have key criteria which must be satisfied before any finance is provided, and borrowers can expect to be required to explain in detail what the growth potential of the business is and how the money is going to be used, as well as showing how they will be able to repay the borrowings and what security the borrowers can offer.

Securing alternative finance may appear to be a daunting prospect to the uninitiated, but according to Walls the most important step business owners must take is to educate themselves on the pros and cons of each method of funding and ensure they are as prepared as possible.

He added: “Having a real understanding of what’s on offer is crucial to securing successful alternative financing, and I advise every business owner to ask questions and consider their options.

“We spend a lot of time working with our clients to help them secure the funding that suits their business needs. This ranges from identifying their value proposition, preparing profit and loss and cash flow projections to show funding requirements and, more importantly, the ability to repay any borrowings, through to preparing an application and meeting with a funder on their behalf.

“The key to successfully securing alternative financing is to know what your requirements are and to arm yourself with the knowledge to identify the best possible deal for your business,” he added.

Established in 2011 with officers near Belfast City centre, Exchange Accountants provides a range of accountancy services and tax advice to a wide variety of locally based SMEs and individuals.

The company has developed a specialism in digital and cloud accountancy services and was the first accountancy practice in the north to be recognised as a Gold Partner with market-leading cloud accountancy software provider Xero.

Source: Irish News