New Business Premises - Deciding on a Property

February 15th, 2010

business-propertyIt is only when you have confirmed at least in principle that finance will be available to fund your new premises that you should begin a detailed assessment of alternatives. Looking over new industrial or commercial property is rather like looking round a new house: there are certain things to look out for and check. Although you are strongly advised to take professional advice from a chartered surveyor about the property you finally choose (and if you are borrowing money to purchase a property, your bankers will insist on a full survey), you can save yourself money by carrying out initial investigations yourself. You can spot obvious problems without recourse to a surveyor. A telephone call to the planning and building control officers, for example, will quickly confirm the use for which the building has approval.

It is worth visiting the property more than once at different times and on different days of the week. You will be surprised how a clear sunny day can brighten up even the most gloomy property. Remember that the vendor or landlord may have spruced it up so that you are seeing it at its best. If you are doubtful about the premises or the landlord, try to find out why the previous occupier left. If the landlord is not helpful ask nearby businesses.

It is a good idea to make a list of all the items you want to look at. It is all to easy to become engaged in conversation with an eager vendor or his agent and miss many important points. How many times have you asked yourself where the kitchen door was located or which bedrooms had fitted furniture, on your return from looking over a new house? In putting together such a list you should consider some or all of the following.

STRUCTURE
Before finally deciding on a property make an initial assessment of its structural stability by looking for signs of weakness. Cracks or bulges in walls and surfaces out of plumb may indicate a building needing expensive underpinning. They may on the other hand reflect local settlement just after the building was erected. Roof timbers should show no sign of weakening especially where they enter the walls. Check that the floors are in good condition. In multi-storey property floors should be capable of taking the loads you want to place on them and stairways should be sound. Look for damp and condensation; it may be caused simply by a blocked gutter or may be due to more serious problems. Check the roof carefully. Asbestos and felt roofs can be very expensive to replace.

Remember that many older properties often look dilapidated and yet are very sound structurally; a thorough clean and a coat of paint may be all that is required to transform them into ideal workspaces.

LAYOUT
Is the layout suitable for your business? Try to work out where all your main items of equipment will go. If your business involves dust or noise is it possible to create a space where office work can be done in peace and safety?

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Major Sources of Grants and Preferential Loans

February 9th, 2010

Although most firms needing finance will have to borrow some money from a commercial lender, numerous kinds of government assistance are also available. Some are directed exclusively at small businesses and others are more widely available. This article outlines some of the most commonly used sources which are relevant to property. It focuses on the assistance you may be given if your property is located in certain geographical areas. This is a complex field and if you need more detail, a comprehensive account is given in Industrial Aids in the UK 1985: a businessman’s guide by Mishka Bienkowski and Kevin Allen, published by the Centre for the Study of Public Policy, University of Strathclyde, Glasgow. If you think you might be eligible for a particular form of assistance contact the organization concerned.

ASSISTED AREAS
Some areas of the country with particular economic problems or high levels of unemployment have been designated by central government as ‘Assisted Areas’. This makes them eligible for regional policy assistance. Government regional policy divides the assisted areas into two groups. The first group comprises the development areas and here both regional development grants and regional selective assistance are available. In the second group, the intermediate areas (where unemployment is generally rather less severe), only regional selective assistance is available.

Regional development grants take the form of tax-free contributions towards capital expenditure, including premises. Generally the grants are intended for the manufacturing industry, but certain management, service, research and technical activities are also eligible. The rate of capital grant is set at 15 per cent, subject to a limit of £10,000 for each new job created (though this ceiling is not normally enforced for firms with less than 200 employees). Alternatively, labor-intensive projects can claim £3,000 for each job the investment creates. For every approved application both the capital and the job grants will be calculated and firms will automatically be paid whichever is the greater.

Regional selective assistance is discretionary but can be provided for projects which provide or safeguard jobs in any part of the assisted areas. It has to be demonstrated that the project would not take place on the basis proposed without government assistance. Relocation schemes are eligible, but only if there is an increase in jobs. The amount of assistance is negotiated on a case-by-case basis and is fixed at the minimum sum needed to bring about the benefits associated with the project. Regional selective assistance can be awarded in conjunction with a regional development grant but eligible expenditure is then assessed net of this grant.

For further information on regional policy and enquiries on eligibility you should contact your regional office of the Department of Trade and Industry. In Wales and Scotland you should contact the Welsh and Scottish Offices respectively.

ENGLISH ESTATES
Although English Estates’ prime concern is the direct provision of industrial and commercial premises in the assisted areas (and in certain rural locations), they can also arrange mortgages with financial institutions at favourable interest rates. For further details contact your nearest English Estates office.

BRITISH TECHNOLOGY GROUP
The British Technology Group was established to promote innovation and investment in British industry. Within the English assisted areas the Group has a wider role than its normal technological focus. It helps all companies which have growth potential and can improve their efficiency by modernisation or rationalisation. This can include money to finance premises if this is part of an overall improvement programme.

COUNCIL FOR SMALL INDUSTRIES IN RURAL AREAS
The Council for Small Industries in Rural Areas (CoSIRA) aims to improve the prosperity of small businesses in certain rural areas of England. Similar services are offered by the small business divisions of the Scottish and Welsh Development Agencies and the Local Enterprise Development Unit (LEDU) in Northern Ireland. Loans for building capital are available to small firms in the manufacturing, service and tourism sectors. Loans are usually for up to 50 per cent of project costs, from a minimum of £250 to a maximum of £75,000.

NCB ENTERPRISE LTD
NCB Enterprise Ltd was set up by the National Coal Board in 1985 to ensure that new jobs were created in areas where pits have closed. The company is currently supported by funding of £20m. It can provide loans to small businesses which may be used for the purchase of premises. Alternatively, it can provide sites and premises for the small firm.

EUROPEAN COMMUNITY FUNDS
The European Investment Bank provides fixed-interest, medium-term loans to firms investing in projects which create or safeguard jobs in the assisted areas. The European Coal and Steel Community provides loans for companies located in areas where there have been coal or steel plant closures. Loans are for manufacturing and service companies which undertake projects that could, potentially at least, employ redundant coal and steel workers (though they do not have to do so in practice). Loans are for up to 50 per cent of the fixed asset costs of a project. Some grants are also available from the European Regional Development Fund. For further details about European money in England, contact your regional office of the Department of Trade and Industry. In Wales, contact the Welsh Development Agency at Pearl House, Greyfriars Road, Cardiff CF1 3XF. In Scotland, contact the Industry Department for Scotland, Alhambra House, 45 Waterloo Street, Glasgow G2 6AT.

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Different Sources of Finance

February 4th, 2010

HIGH STREET BANKS

The high street banks are the most obvious source of loans. Any local branch should be able to provide further details and itemize the information they will require from you before finance will be granted. In general, banks are the most appropriate source of funds but if you do use them always contact more than one because their interests rates and terms vary. In recent years the commercial banks have become much more flexible and positive in their lending policies to small firms. They used to lend only relatively modest amounts to small businesses and usually over time periods of less than five years; now they are increasingly competitive. Under the right circumstances most banks are prepared to lend for up to 20 years. They will consider lending almost any sum of money provided that suitable security is available.

MERCHANT BANKS

Merchant banks provide long-term finance and capital for growing businesses. Unlike the high street banks they do not provide overdrafts or bridging loans. The major part of their business is with term loans and mortgages of between five and twenty-five years. With adequate security there is no real limit to the amount they will lend, but their minimum is usually around £50,000. Because of the larger amounts they deal with, merchant banks tend to lend only to companies or individuals with a proven track record. They usually insist on a thorough look through your accounts. Your track record will determine how flexible the merchant banks will be. They will usually lend up to 75-80 per cent of the property’s value. One drawback of many merchant banks is that they often lend only on an equity basis, taking shares in your company in return for the capital they loan.

INVESTORS IN INDUSTRY PLC

Investors in Industry (previously known as ICFC) is a merchant bank type of organization owned by a consortium of high street banks and the Bank of England. Their head office is at 91 Waterloo Road, London SE1 8XP; tel: 01-928 7822. Their particular interest, as their name suggests, is in industrial lending. Investors in Industry pride themselves on their assistance to small private companies. In 1985 two-thirds (£227m) of their new investment went to small businesses and over half of the year’s total investments were in amounts of £100,000 or less. Their emphasis on lending to smaller industrial companies can sometimes make them more responsive than merchant banks who have a much wider-ranging investment policy.

BUILDING SOCIETIES

Some building societies, predominantly the smaller ones, will give mortgages to purchase industrial and commercial property. Indeed, many societies are keen to expand their lending in this area, so this may be a growing area in their future activity. Some of the larger societies offer private purpose loans which, as their name suggests, can be used for any purpose including the purchase of premises for your business. The type of security required is variable, but if a large enough proportion of your household mortgage is ‘paid off this may satisfy their requirements. You can use a mortgage broker to identify the building society whose terms best meet your needs. The broker’s service should be free. Avoid paying any ‘facility fees’.

LOCAL AUTHORITY SCHEMES

Many local authorities, anxious to encourage local economic development and employment growth, offer loans and in some cases grants to help small businesses move or purchase premises. As the availability and terms of these grants and loans varies between authorities you should contact your local authority’s industrial or economic development officer for information.

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Managing Credit Card Debts

April 5th, 2009

Ever owned a credit card? If so, read on…

If you have ever owned a credit card then you probably would also been caught up in the clutches of credit card consolidation companies who make promises to reduce your credit debt interest rate through doing your job of paying them on time for you. These credit debts are tedious to repay and can make you wish they would disappear instantly. However, there is no easy way out of these debts. The first step here is to have only one or two credit cards with you and get rid of the remaining. The surest way to achieve debt free living is to spend prudently only on the important stuff you absolutely need and reduce any new purchases which could add extra debt to the bank balance. This way “overhead” is kept to a minimum and there is no added pressure on the part of the card owner.

Well then, how do I keep safe from credit debt?

Once you have decided to reduce credit debt, stop using the credit card for purchases which can be paid for by cash. Paying through credit cards for every purchase will eventually worsen the situation for you. Your ultimate objective is to own credit cards to make online purchases and emergencies. If you are prone to purchasing items on impulse, take a moment to think about it. A debt free living is not difficult if you can figure out a plan to deal with the ensuing debts. You don’t need to be intimidated even if you are knee deep in credit debt. Once you do the math, you will realize that the first step towards managing credit debt is to stick to your deadline each month for payment. You will have a large interest accrued to the sum if you don’t pay your instalments regularly. Come up with $20 more than the minimum due you owe if you are attempting to pay off your credit card. Begin by doing this with the card that has the highest interest rate and you will find yourself free from the credit debt in a few years.

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