Britain’s double- dip recession?

Wednesday 25^th April’s shock revelation showed that Britain is experiencing its first double- dip recession since 1975.

A recession is defined as two consecutive quarters of contraction (negative growth). The economy shrank by 0.3% in the fourth quarter of 2011.

The industrial and construction output are responsible for the most recent decline as the sector barely grew.

There is now a worry that this data will dent already lacking confidence and push the recovery back, with a likelihood that the economy could weaken further.

The shock revelation piles further pressure on the government to increase their efforts to boost the economy and overcome challenges to ease Britain’s debt.

However, these figures are only preliminary and are only based on about 40% of available information, which will be reviewed to reach further statistics in the near future.

If your business is suffering due to the state of the economy and lack of consumer confidence then call Beer & Young today for some free advice on ways to save your company!

Majority of company owners are not aware of the capital, sales and revenue in the business

The majority of business owners are able to write a business plan and put together credible financial forecasts either alone or with the help of an accountant. However most struggle to systematically report progress and analyse what is going on within their company. Figures show that only about 10% are able to do this without financial assistance. So it is no surprise that there is a correlation between this and the number of businesses that survive over three years of trading also being at 10%.

Business failure rates are also high as most company owners can’t spot warning signs, let alone deal with them. You need to ensure that you are realistic about the company’s performance, rather than being overly optimistic and blinkered when it comes to evaluation.

Systematically monitored financial progress and analysis of results is the key, however only the minority of business owners have this under control. It is essential to be aware of the company’s costs, sales and revenue both current and future and work out how much capital the business will require going forward.

If this is something that you have done and have figured out that your company will require some additional funding, contact Beer & Young for a free no obligation chat to discuss potential investment.

R3 defend themselves against BPF’s criticism of pre-packs

The British Property Federation (BPF) have claimed that the insolvency system is underhand when it comes to the retail sector and have released a statement saying that pre-pack administrations are a means of reinforcing failure. Securing the best results for the creditors is meant to be the main role of the IP, however they are becoming concerned that their biggest concern is becoming the interests of the buyers.

However a representative of R3 (the biggest insolvency body) have expelled the assertions regarding underhand dealings and accusations that the insolvency system is unfair.

A pre-pack is in place to allow a potential sale once other options have been exhausted. It is in everyone’s best interest as it maintains some value in the ailing business.

A purchaser is given a license to occupy a company’s premises by an administrator in a pre-pack. This would provide the landlord with a temporary tenant, allowing the landlord the opportunity to negotiate terms of a tenancy with a new tenant whilst still being paid rent.

For a turnaround investment specialist like Beer & Young it is always interesting to hear the views of trade bodies regarding the state of the economy. Contact us if you would like some real help.

Business Failure Rates Set To Rise in the Next 2 Years By 10%

In 2011 approx 23,600 businesses collapsed. This number is expected to rise in 2012 to 25,600 and increase again in 2013 to 26,800. The pessimistic forecast has been blamed on low levels of consumer consumption fuelled rising unemployment and lower earnings.

The three sectors likely to fail most in 2012 are construction and real estate, businesses services and retail and wholesale. The sectors looking set to enjoy positive growth are manufacturing, media, technology and telecoms. This goes to show that companies that are developing innovative products are more likely to succeed, whereas businesses that do not respond to new “norms” are at greater risk of struggling.

However, by 2013 there will be a decline in the rates of failure, with figures falling to 23,700 by 2015.

If 2013 seems like an eternity away and you require financial help now, contact Beer & Young to discuss business angel investment for your company. Don’t let your business be on the list of ones that fail!

Beer & Young- Only Intermediary Amongst 9 Specialist Turnaround Funds

Beer & Young (B&Y) were invited to speak at a major regional event and out of 10 speakers were the only intermediary amongst nine specialist turnaround funds.

Within the industry, the minimum deal size for most investment companies is £2 million whereas Beer & Young’s maximum deal size is £3 million, putting B&Y in a unique position in the sector. B&Y have a distinct focus on the SME sector, particularly those SME’s that require turnaround funding that can’t find funding through traditional sources for example banks and ABL and would value the input of an investor with prior experience.

B&Y have in excess of £1,000 high net worth investors the majority of who on an individual basis want to become involved with the business. Fund investors are driven by the rational objective assessment of the financial outcome and risk, whether the existing management are efficient or need changing and to work to a substantial exit multiple, whereas the angel investor is typified by B&Y’s type of turnover, individuals, fast decision makers with an affinity to the business and a deep desire to use their hands on skills to protect and grow their investment. 

Beer & Young are the only company in the market who combine angel investors with smaller than average investment amounts and only in the SME sector, which makes them very niche.

Consequently at the end of the meeting a large amount of visitors to their syndicate room wanted to talk to them and they fully expect to engage in dialogue and commitments with a number of individuals and firms on all levels on an on-going basis.

If you require angel investment contact Beer & Young today on 0207 329 6886.

SME’s have a higher than average debt

It has appeared in recent research that small business owners are more in debt than the average person. It was revealed that the average personal debt of a small business owner is circa £30,500 compared to the Consumer Credit Counselling Service clients who have approximately £20,000 of debt.

Small business owners also have an average of 10-20% higher level of arrears in council tax and utility bills compared to the norm.

The majority of small business debt is held in personal loans and short term credit cards.

If your business is in financial trouble and you could benefit from a cash injection speak to Beer & Young, they may be the answer to your problems.

Rent owed during administration must still be paid by the company

The high court have recently ruled that rent which falls due before a company goers into administration must still be paid and will not be classed as an administration expense. It was ruled that is should rank equally alongside the other unsecured creditors’ claims, even if the property is used by the administrators during the rent period. It was ruled that if rent falls due during an administration the administrator would have to pay the entire quarter’s rent even if the property was vacated after a few days.

Going into administration is bad enough without the aforementioned added worry. Don’t let things get that bad for your company, contact Beer & Young early on to discuss the options available to you, including investment from one of our business angels.

Bosses re-mortgaging homes and taking pay cuts to avoid making staff redundant

Research has shown that small businesses are going to great lengths to protect the jobs of their employees during these hard economic times. One in ten small business owners have even gone as far as to re-mortgage their own home to free up money to pay wages rather than making their staff redundant.

35 per cent of business owners have admitted to taking significant wage decreases in the last 5 years to avoid laying off staff and not just as a short term measure. 60 per cent of them have taken a salary cut for over a year with 17 per cent saying it could continue indefinitely. 70 per cent have cut them by as much as a half, while one in 20 have admitted to scrapping their salaries completely.

Don’t wait for things to get worse, contact Beer & Young today to talk about investment.

Crowdfunding

One of our online colleagues based in the states hosted this discussion which we find fascinating. Most of the comment relates to funding in the US however, the content is relevant to the UK market. One could argue this is just someone’s opinion but Beer & Young’s MD, Nick Young, sees a lot of similarities in terms of the anticipated future of UK crowd funding.

For established trading businesses the crowd funding model is unlikely to work very often and it is best to talk to experienced advisors (for example Beer & Young) if your business needs urgent capital.

I've posted many Discussions on several Groups and my comments have morphed into an "almost" White Paper on the status of private investors shifting to from Wall Street and start-ups to SMEs. I hope you find it informative and by all means please add your opinion to the discussion and by all means agree or disagree with my findings.

Crowdfunding was and still is illegal in the US, but CrowdFinancing has always been legal, just unknown.

I've spent 5 years researching the subject of financing and funding private-sector businesses and it's never been so bad. I've been on both sides of all sorts of deals in 40 years, but Crowdfunding does not attack the #1 problem which is entrepreneurs/CEOs trying raise funds being woefully ill-prepared. Investors talk about this all the time behind closed doors, but it's never disclosed. Would it help if they explained it? Probably not.

I had a long call last week with someone who was a serious angel investor in an earlier life that now mentors start-ups, he commented that 90% of the college-grad entrepreneurs that he sees can't be "coached"! They are either so in love with their idea that they refuse to consider that the investor is taking any risk, or lack the experience to know what they don't know. Crowdfunding makes this situation far worse resulting of a new business being successful highly unlikely.

A really interesting comment I overheard regarded the inability to acquire follow-on funding with the stock owned by a "naive crowd". It's bad enough when it's friends and family money.

Most savvy investors right now won't invest in any business unless there's revenue and that's pushing them towards existing small to mid-caps doing deals banks can't or won't do that produce a collateralized, verses equity, 10-25% ROI. Before an irate angel investor climbs on me, less than 1% of accredited investor are angels according to published data. Think about that, 99% of private investor don't invest in the private sector, at least as angels. I can't find on the 99%, but I know it's huge compared to start-ups.

I see 100 start-ups a day and I tell them a select few they can try raising money, but most to use their own money to buy a business, use private investor money to bridge the sale, use private money to grow the business, then if your start-up idea still looks good then go for it using only your money. You'd be amazed how "coachable" they become when they have skin in the game.

SME’s are missing out on Government growth initiatives

Only approximately 5 percent of SME’s are taking advantage of government support available. These schemes were established to help to improve environmental performance and ultimately save money. Entrepreneurial or research and development tax relief and capital allowances are among some of the incentive opportunities not being taken advantage of. Only 34 percent of UK SME’s are even aware of the schemes existence let alone how to access them.

Turn to Beer & Young for some free advice on what help is available for business owners.

NLGS Scheme not designed to help small businesses

It has been claimed by the British Chambers of Commerce that small firms, as well as younger and high-growth firms (who already have trouble getting credit) may not be supported by the National Loan Guarantee Scheme (NLGS). The NLGS is a scheme designed to help businesses acquire cheaper bank loans. It appears that the help will be more forthcoming to medium sized firms.

Although many of the major banks have signed up to the scheme, HSBC has not as they believe it to not be commercially viable.

If you are a small business in need of help contact Beer & Young. They have a large network of  business angels looking for the right investments.

Hard Times Ahead

The number of company failures in the England and Wales increased by 4.5% from 20,901 in 2010 to 21,843 in 2011. In the South East, South West and London 1 in 70 businesses became insolvent .

Despite interest rates remaining low the economy is still expected to worsen over the forthcoming year. There will be a rise in fuel food and travel; however wages are expected to remain stagnant.

Formal company insolvencies are predicted to rise in 2012 due to the higher levels of distress. The lack of creditor and supplier leniency will play a part in this, as when consumer confidence falters companies who rely on consumer spending will suffer when they start to tighten their wallets.

If your company gets hit hard and is struggling financially then contact Beer & Young for some advice on the best way to move forward.

Improvements to EIS Scheme

The Seed Enterprise Investment Scheme was confirmed by the chancellor in the recent budget. This enables investors to inject up to £100,000 per year in qualifying seed businesses.

The EIS scheme (a tax break for people who invest in qualifying companies, releasing their income tax liability by 30% of the amount invested) has also increased to £1 million, with the qualifying companies extended to £5 million per annum.

With these new incentives put in place it gives greater flexibility to make investments in clients businesses. Please contact Beer & Young for more information.

Will tomorrow’s budget help financially struggling SME’s

In the budget tomorrow there is expected to be a 30 percent tax relief on £500,000 within the enterprise investment’s scheme, with an increase to £1 million from 6^th April.

Companies are also entitled to write off the cost of acquiring qualifying assets (up to an annual limit of £100,000) against their taxable profits, including commercial vehicles, computers and other equipment.

This is excellent news for investors and business owners; as if the investors are receiving a higher tax relief then they will be more inclined to invest. Please call Beer & Young today to discuss your investment requirements.

Will this scheme be a success

The government have launched a national loan scheme, whereby small businesses will have billions of pounds of state backed loans available to them.

The aim is to create a lending scheme that will unclog the flow of credit to businesses. The scheme has been unveiled today by the Treasury and has been backed by 4 of the biggest banks, Barclays, Royal Bank of Scotland, Lloyds and Santander. The national loan guarantee scheme (NLGS) will see up to £20 billion of guarantees on unsecured borrowing from the banks aforementioned.

The entire benefit that the banks receive from the guarantees will be passed on to the businesses with a turnover of less than £50 million through cheaper loans.

There will be a discount of 1% for SME’s that take out NLGS, compared to the interest rate that would have been offered outside of the scheme. Factors including market share, gross and net lending track record of lending to small businesses and capacity to lend under the scheme will affect the Treasury’s decision on the allocation of guarantees that each participating bank will receive.

Will this new announcement have a real impact on the funding of SME’s or will it be damp squid like the enterprise finance guarantee scheme which has failed to deliver the much needed capital to business owners.

Beer & Young have continued to raise capital from investors where banks are unable to lend money.

Care home operator in Yorkshire collapses

A care home operator in Yorkshire (which runs 6 care homes) has suffered cash flow difficulties and has recently gone into administration after 9 years of trading.

This has thrown into doubt the future of 80 pensioners as well as having the potential to make 80 members of staff unemployed. Five of the workforce have already been made redundant.

This company will not be the last; many nursing homes are going bust or are coming under threat, particularly as banks look to reduce exposure to the sector.

However, there is no need to panic as investors are still active within the sector. Beer & Young are here to help and presently have one group already working through investment terms

The number of SME’s seeking loans has decreased

In the final quarter of last year 17% of all those who applied for overdrafts were rejected and 33% of those applying for loans got turned down. The number of smaller enterprises looking for finance has dropped, with most of them being classified as “happy non seekers”.  The figure of “happy non seekers” has risen from 68% last year to 78% this year.

It appears that the general public are so convinced that the banks won’t lend money that they have given up even trying to find out. However if your business is in trouble and does require investor funding, Beer & Young can help.

UK economy- worse than we thought

It has been reported that travel companies have a record low cash reserve. Due to a 49% increase between the third quarters in 2010 to 2011 in companies facing critical distress, it is inevitable that there will be further insolvencies in the near future. This rise of the levels of critical distress also stretches to other sectors, including the construction sector which has seen an increase of 41%, 63% in the property sector and 92% in the support services sector.

The British Retail Consortium have released data showing a decline in online spending in the third quarter of last year compared with 2010. Growth in online spending has slowed by 10%, a direct result of bargain hunting.

If your business is struggling financially and needs a cash injection contact Beer & Young. They have an unrivalled network of active private investors looking for the opportunity to help.

Royal Bank of Scotland increase the staff in their recovery department

The Royal Bank of Scotland has had its fourth consecutive pre-tax loss since being bailed out by the tax payer in 2008. The loss for the year comes to a total of £2 billion, an increase of £900 million on last year.

Within the last year loan defaults on all sectors within the group’s core business has increased by
£1.4 billion. Loans and advances classified as core were down year on year (excluding 3 sectors). Net loans made have decreased in the last year by £18.5 billion.

There has been a year on year increase of 800 staff in their Integration and Restructuring division. December of 2010 saw 300 team employees whereas in December 2011 the number was up to 1100.

Senior associate of Beer & Young comments: The fact that RBS have had to increase their recovery staff so significantly shows how many more clients must be at risk. If your company is struggling from financial difficulties please give Beer & Young a call today

Turnaround Investment Funding

The ongoing economic uncertainty is not aiding in inspiring investor confidence in most areas. The industry figures reaffirm this by showing a decline in turnaround private equity investments between 2007 and 2011. It would therefore be fair to say that companies in the current climate would assume that turnaround investing is not something that private equity is interested in.

However, over the past 2 years things are changing. Banks have accumulated large portfolios of assets resulting in them seeking funding partners to help them exit positions in assets. Funding has also taken a more alternative path, with the individuals investing directly into the business, rather than following regulated fund structures.

Although many companies have closed between 2010 and present day, Beer & Young are still a thriving business. With the UK’s unrivalled number of active turnaround investors, where better to turn if your business is in trouble? Beer & Young are testament to the fact that there is still a market for turnaround funding.

SME Growth Encouraged by Chancellor

The Chancellor has made plans to help with funding issues and stimulate growth in the SME community. They will be given the opportunity to focus on running their businesses, rather than facing the hurdles of the red tape surrounding issues like planning laws, employment laws and health and safety, which will all be relaxed.

The pressure will also be reduced, as plans to put in place auto-enrolment pensions have been postponed as well as extending the business rates holiday by 6 months.

The opportunity for SME’s to attract cash investments to assist with their growth has increased, due to the relaxation of the rules governing the main Enterprise Investment Scheme.

Our initial reaction to this is that it sounds all very interesting and positive but the proof as ever is in the delivery rather than the sound bites. Beer & Young have a 14 year track record of delivering what business owners really need, which is new money.

Beer & Young came to the rescue at the 11th hour

Nick Young, managing director of Beer & Young is featured in an article in the ICAEW magazine (Institute of Chartered Accountants) this month.

The article was centred on the world of turnaround and funding. Its lead feature was a case study where Beer & Young successfully raised 2.5million.

The company had exhausted its funds and the bank was unable to provide the funding it required. At this point Beer and Young stepped up, introducing 7 qualified investors, from which 2 firm offers were materialised and one was accepted.

This saved the jobs of all the employees and prevented the company from having to close its doors 2 months later as predicted would have been the case without the help of Beer & Young.

Keep your business in existence… contact Beer and Young today!

Downing Street Business Angels

The Managing Director or Beer & Young went to visit David Cameron at 10 Downing Street for a breakfast meeting about business angels.

The breakfast event was held by Lord Young of Graffham (Enterprise Advisor to the Prime Minister), with the Prime Minister himself opening the event with a ten minute speech.

The aim of the event was to promote awareness, share stories and views and find out what else could be done to encourage the UK Business Angels market.

Business angels play a vital role in offering financially struggling companies investment as well as their expertise and experience.  The government have recognised the importance and potential of the industry and are giving it their full support.

Beer & Young are leaders within the industry, currently hosting the largest number of active Business Angels and private investors. Call Beer & Young today if your business is in trouble and see how they can help you.

UK Business Distress

The UK economy appears to face increased business distress in the near future, especially companies in the South West which are very likely to face another tough year.

When it comes to critical distress, the South East has had a year on year increase of 33% and London has had a rise of 19%. These regions are starting to face severe financial issues; however, up until recently they have seemed recession proof. This could indicate the progression to a deeper stage of the recessionary cycle in the UK. Particularly in the automotive, construction, general retailing, professional services, property sectors and travel and tourism the distress levels have gone from significant to critical levels.

Due to the Olympics being held in London this year, it is believed that there will be serious consequences to the travel industry in particular, with at least one household name failing. As well as the tourism sector, with West End’s theatres already reporting a 95% decrease in sales for the duration of the Olympics.

Don’t let this be the end of your company, contact Beer & Young today to see how they can help.  Beer & Young have many associates in the South East and South West regions who can arrange an informal chat with you either on the telephone or in person.

Failure of Project Merlin

Beer & Young senior associate Michael Morley Smith comments that he is not surprised that Project Merlin appears to have failed. Despite the agreement to boost lending, the number of small businesses using a loan or bank overdraft has fallen over the last two years. The top 5 banks, including Royal Bank of Scotland, Barclays, HSBC, Lloyds and Santander missed their agreed targets for last year. 

Overall lending however is still above target, showing that money is going to large businesses, rather than small and new businesses that require it. The Merlin banks decreased small business lending by 6% (falling short of the SME lending target of £1 million) although promising to grow it, leaving jobs and growth hanging in the balance.

Michael further comments “we operate the largest and most active network of investors in the UK. I talk with investors almost every day, they are serious about helping small businesses and have capital to invest”.

Business Confidence in Negative Territory for 2012 First Quarter

Over a thousand businesses were monitored to put together a survey which shows that business confidence at the start of 2012 is in negative territory. The Business Confidence Monitor (BCM) is an indicator for growth and can make predictions regarding the recession and pick up on early warning signs.

Two declining quarters of gross domestic product declining could be the indication that the UK economy is currently be in the midst of recession.

In London, the Confidence Index has dropped 33.8 points since quarter 1 2011.

The findings from the Business Confidence Monitor this quarter would suggest that after the record fall in the last quarter business confidence hasn’t declined further, however businesses do remain cautious about the UK’s economic outlook. Businesses are bracing themselves for a long road to recovery as financial performance indicators are increasing at a very slow rate.

If your company is in financial crisis it doesn’t have to be the end, contact Beer and Young today for a free no obligation chat and find out what they can do to help.

Madhouse Possible Administration

It is always interesting to see what is going on in the market place. This story from last week has caught our eye.

Everyone seems to have heard of Madhouse. The Budget fashion chain has put 700 jobs at risk upon entering administration. They declared a net loss over the 12 month period ending January 2011 of over £195,000. It was reported that the company directors paid themselves £16,000 more in the last accounting year before the chain collapsed.

The lead administrator for the company has also handled the cases of Poundline, Retail Scotia and UK travel Shop in the last few months and is a known name in the retail space. Maybe if they had have approached Beer and Young they could have raised the money they required to save the business.

Company insolvencies have increased and experts predict this to continue

Company insolvencies have gone up by 7.4% in quarter 4 of 2011, compared to the same period in 2010.

Compulsory liquidations increased by 14.1% between quarter 3 and quarter 4 of 2011, however, increased at a rate of 16.1% compared to the same period in 2010. Company Voluntary Liquidation (CVL’s) have risen by 3.4% based on the same period in 2010.

Other corporate insolvencies have registered a 5.3% increase between 2010 and 2011’s levels, including receivership's, administrations and Company Voluntary Arrangements (CVA’s).

The figures show that in 2011, on average, one in 138 companies were liquidated.

Do not let things reach the stage where your company would have no other option, give companies like Beer & Young a ring today to discuss private investment.

Struggling Business Owners Considering Returning to The Work-Place

A report published this week reveals that one in four small business owners are planning to get out of business and back into employment as trading conditions are very tough, whereas others are scaling down their enterprise and seeking part-time work to supplement their income. The report also reveals that one third of small business owners have lost their drive and enthusiasm.

According to the report, a significant proportion of small and medium-sized business owners are thinking of returning to work with 50% saying that it is too difficult to be a business owner in the current economic climate.

A quarter (26%) of SME owners admit they no longer enjoy running their business, with a third (32%)  having stated that they no longer have the initial enthusiasm when starting teir venture. As a result, the report also reveals that one in four (25%) SME owners are considering returning to the workforce as an employee.

A contributing factor may be the reduction in the money they have been able to take out of the business for personal use. Half of those (50%) surveyed have reduced the money they withdraw, over the past 2 years, with restaurant owners suffering the most. Nearly three-quarters (73%) of businesses in the catering sector have experienced a marked decline in the amount they withdraw from their business - with almost a third (29%) reporting a drop of between 20-25% and 10% reporting a drop of up to 50%.

There appears to be very little improvement in sentiment in 2012. More than one in three (35%) believes there is an increasing risk of an economic "double dip" recession, a further increase compared with 28% when the same question was asked in June 2008.

However, at Beer and Young we have been very successful at raising capital for struggling businesses; see our website for case studies.

Beer & Young Director, Nick Young named as one of the “Power 100”

Sponsored by Insolvency Today, in partnership with Willis, the 2011 Power 100 list recognises

key people who are making the most demonstrable impact on and positive change within the insolvency profession.

With well over a decade of experience in a range of insolvency, recovery and turnaround work, Nick also accepted the “Business Rescue Funder of the Year” award for the second year running at the Insolvency & Rescue Awards held in October.