Wealth Check: Can I start a pizza business without banks taking too large a slice?
Saturday 18 April 2009
Case notes: Bertie van der Beek, 23
Salary: Bertie does not yet have a consistent income. He currently earns around 150 every Sunday and is looking for more work.
Monthly outgoings: Bertie spends around 600 in living expenses.
Savings: Bertie has 400 in a HSBC current account.
Debt: Bertie has a student loan of 15,000 and an overdraft of 900.
Bertie van der Beek, 23, is hoping to open his own pizza takeaway shop in the next six months. He currently runs a pub kitchen franchise every Sunday, but is looking for other work to fill the rest of the week.
"At the moment I am just earning to pay my way until I can start up the business," he says. "I have spoken to the bank, started to write a business plan and secured 16,000 from private backers, but I'm still waiting for the perfect venue for the pizza shop."
Bertie is determined to work for himself and says that he is happy to take on the risks that starting up a new business entails. However, he is not certain about two particular aspects of owning his own business: how to acquire further financial backing and how to go about paying taxes correctly.
Three independent financial advisers help Bertie this week: Danny Cox of Hargreaves Lansdown, Adrian Lowcock of Bestinvest, and Aj Somal of Positive Solutions.
Starting a business
Bertie may find it difficult to start a business in the current economic climate. HSBC has offered him a 12 per cent unsecured loan, which the advisers agree is a very high rate. "Bertie should approach the other major banks to see if he can secure lending at a better rate," suggests Aj Somal.
Somal also advises Bertie to look for alternative sources of finance. "If Bertie can secure additional funding from friends and family rather than relying on the banks, then he should do this, as he will avoid paying interest charges," he says.
If Bertie does decide to opt for a bank loan, he will need to produce a comprehensive business plan. "Business start-ups are generally regarded as high risk by banks," says Danny Cox. "So they will want to see that he understands what he is doing via the business plan."
Cox adds: "Bertie's business plan will need to identify potential clients or customers who will pay for his services and deliver a profit in a realistic time."
Bertie needs to be clear about precisely how much money he will need to cover his cash flow requirements for the first year.
"If the amount of cash Bertie needs is less than he can get from his backers and the bank, he may need to save hard until he can finance the deal," states Cox. "Most small businesses fail in the first year because they run out of money."
Cox advises that Bertie should invest in a tax-free cash ISA, which will allow him to save up to 3,600 per tax year.
Lowcock agrees that Bertie should save up in order to self-finance the business. "Although waiting is not an attractive option, rent and loan rates may fall while he is saving up, making it cheaper to start a new business," he says.
Bertie should also consider three options provided by the Government to help new businesses. "The Enterprise Finance Guarantee helps business that would not normally quality for a loan, while Small Loans for Businesses offers loans of up to 50,000 to small and medium-sized businesses that have been refused bank finance," explains Lowcock.
"Finally, Finance for Business provides flexible finance solutions such as a loan or equity finance for businesses with a viable business plan," he says.
The advisers agree that Bertie should seek out further business advice. He can obtain this from a number of sources, including the Chamber of Commerce, from a local Citizens Advice Bureau, and Business Link.
Lowcock also suggests that Bertie should contact other business people for advice. "He can tap into their experience and expertise in setting up a business," he says. "They will be able to provide worthwhile insights."
Bertie needs to register as self-employed with HM Revenue and Customs (HMRC). He must also complete his self assessment tax return for 2008/09 by 31 October 2009 or 31 January 2010 if he is submitting it online.
He will need to keep all business receipts and set up a system to keep a record of all financial transactions. "This is important for the successful running of any business," says Lowcock.
"It is worth Bertie going through his affairs with an accountant," says Cox. "They will be able to set him straight in advance of him setting up his new business."
Lowcock advises that Bertie pays off his debt while building up as much savings as possible.
However, Somal considers that Bertie should delay repaying his 15,000 student loan until after his business is up and running.
"He should concentrate on reducing or eliminating any short-term bank overdrafts, as these are more than likely to be incurring high interest charges," he warns.
- 1 Woman 'suffocates newborn baby in plastic bag and puts it in her desk minutes after giving birth'
- 3 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 5 Chinese student carries disabled friend to school every day for three years
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...
Day In a Page
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms