drb5

iTrader: (4)

Has anyone used a personal loan for ANY type of business use?

I'm starting a new business and I don't need a ton of cash, but it sounds like its a load more hassle to get a business loan than personal and was curious if anyone had told a wee fib before to do the same?

Boro

iTrader: (1)

I'm pretty sure you could tell them it was for a car and they'd be none the wiser ;-)

dpb

Probably won't be able to right off interest on the loan tax wise?

Boro

iTrader: (1)

Could he not get the cash then loan the company the money and charge interest?

Best place to ask this sort of stuff is UKbusinessforums.

hodgy0_2

The taxman will not be interested where the money is or is not from, so that will not be an issue tbh

Money is just commodity - and has a cost, get it from the cheapest/best value place you can

billythekid

Are you LTD?

Cockney Wideboy

iTrader: (2)

we took out a personal loan to start a new business...as the interest rate was lower...we told the bank what we wanted it for which was mainly stock and fixtures and fittings but also for some initial cash flow...they had no problem with it at all...just be honest...I really don't understand why people seem so hell bent on lying all the time...we did take a business plan with us to the bank though showing projected income etc...

as above we still offset the interest against our tax bill etc...its a cost of the business like anything else...

The main difference between the two loans is what it is secured against...because we are not a limited company then in the eyes of the bank and the law we are still personally liable for the repayments...therefore just getting the cheapest interest rate makes sense...

if you are a limited company things are a little different...but Banks are getting a touchy on this now and may still insist on a directors guarantee of some description...most likely your house...so again...no real difference

hope this helps

drb5

iTrader: (4)

I'll be a sole trader.

I don't want a noose around my neck, or to put everything through the business, that it puts my new venture into a deficit straight away, although i know nothing about all this stuff.

john banks

If you do not put real costs to your business through your business (which are allowable) you are subsidising the Inland revenue. I suggest you do not do that in your circumstances.

Cockney Wideboy

iTrader: (2)

As a sole trader you will be personally liable for all debit in the business...you get some protection from this if you are Limited.

But being limited has additional complexities...

the decision whether to go limited or not will depend specifically on you and your business. for us remaining sole trader is a better option...but its not for everyone...

and as a new business even if you are limited I would say that a bank would ask for a personal guarantee on any start up loan...they did with us anyhow.

The ideal way to start any business is without borrowing any money but unless you've got that money saved up it can't be avoided...without wanting to sound harsh...you have got two options really...don't take any risks and don't start a business...or take a punt and borrow the money you need and set up your own business.

we didn't need a great deal of cash <£10K and if the worst happened we could have raised the money to pay off the loan by selling our cars etc...wouldn't have been ideal but at no point would we have lost the house which was the main thing.

if you have got confidence in the business idea, done your research and are confident that you can make it work then starting off in debit shouldn't be an issue...just make sure that you have got some assets to sell on as a just in case.

Good luck with what ever you decide.

Chris

drb5

iTrader: (4)

Again, I'm new to this, so don't know what's allowed and what isn't.

It's probably then best to speak to my soon to be accountant and put the idea past him...

Thanks for the info guys.

drb5

iTrader: (4)

Thanks for that Chris.

As a trial, I've used CC's for my buying and as of right now, i have around 7k and I'm juggling that on 0% balance transfers. it's a bit of a ball ache doing this, but it's better than a loan at the end of the day. the 7k is worth around 11k, so the business is definitely profitable. Mum and dad can offer 4-5k as a loan, which would help some of it, but I really need a lot more stock to make it all work. I was going to open a shop, but we're now think it would be easier and better if less money was poured into a shop and more into stock, but overall less money spent.

I'll speak to the accountant and see what he suggests himself, but yes, I certainly don't want to borrow too much, if not required.

Cockney Wideboy

iTrader: (2)

Agreed, you need to put all real genuine business expenses through the business...other wise you will be taxed on turn over and not profit

for example our business turn over is circa £100K a year....but profit is currently around £15K...not the best margin if I'm honest but still its a profit.

Anyway we pay tax and national insurance on the £15K part...not the £100K part...that's a massive difference...

Out of the £100K we have to pay rent, VAT, Stock, Staff wages, insurance, utilities etc....I certainly wouldn't want to be paying an extra 30% on top of that...

I don't mean to come across as rude (please don't take offence), but it sounds to me as if the financial side of running a business is not your strong point, this is no bad thing (and in our business I deal with the money and the missus runs the shop day to day...we both work to our strengths)...but my advice would be seek advice from someone that you trust that does understand the money side of things and you may find it best to employee an accountant...other wise you could end up paying too much tax or not enough...and either way is not good.

hope this helps

Chris

Cockney Wideboy

iTrader: (2)

Agreed, get rid of the Credit Cards ASAP...the key to it is to get enough profit from the sale of your previous stock to buy the next lot of stock so that you don't end up borrowing more money to buy more stock...

If you don't need a shop then don't get one...we need a shop for our business...our rent is £17K per year and then you have all the other expense that go with that...

I hope it works out for you...I'm no expert by any means but if I can help, just ask and I will try

Boro

iTrader: (1)

In order to try and keep the costs down, could you possibly ask friends or family how they run the financials, ie, sole trader, ltd, vat, tax, etc.

I've found speaking to people I know well enough and running similar sizes businesses to be really helpful.

drb5

iTrader: (4)

I defo don't plan to take out more money on the cards now, but I know what your saying Chris.

parents have loaned me money to cut down the majority of the CC's, so now i need to look at loans rates etc and decide whether to just get rid of the cards altogether, or them plus more for extra stock and start building up from there. ATM I'm not making anywhere near wage material, but each item is gaining me 30-50% profit, so I know where I am there...

Cockney Wideboy

iTrader: (2)

A 50% mark up is good, providing that the turn around from starting with the raw products and turning them into the final product is reasonable too...

i.e. if the raw material cost £100 its no good if it takes you a week to turn round 1 product and you only make £50 per week...but if you can turn out 10 a day then your onto a winner

Credit cards can be useful...but need to be used with caution...we use our credit cards to pay suppliers after 30 days and then pay the credit card amount in full when the statement comes through...

This is not to manage cash flow though, we could pay our suppliers in cash on the day of purchase if we wanted to but I always believe that the money is better in our accounts than someone else's and if you get a reward card even better...free money

It takes a lot of discipline though and only works if you always pay the amount off in full every single month...once you fail to pay the amount off in full you are straight away paying 15-20% more for all your stock...and the whole thing falls down...so probably best to get rid of the credit cards ASAP in your case and then once the business is on a stable footing and self funding you can look to see if a credit card can work for you

Having your own business is not for everyone, and its certainly not easy...but get it right and its great...good luck in what ever you decide and I hope it works out for you

Cheers

Chris

billythekid

Speak to an accountaint - a good one.

Trust me, you are going to get shafted other wise with tax.

I made this mistake when I went contracting to start with.

3 months contract, must start straight away. So off I go "will sort out tax etc when I get back". Pay comes in form of GBP cheque and I pay it into my bank. Do my 3 months, make a nice bit of money.

Speak to accountaint AFTER this and he hits his head on the desk. My tax bill for that 3 months made my eyes water!!!

Went LTD, got another contract for 12 months, total tax bill for the whole year was only a couple of grand more than the first 3 months!

If I needed some kit, it went on the company debit card. Hotels, flights, hire cars, training... company card.

With LTD you also get more options for how you pay yourself, you can even take a short term loan if you really want from your own business.

You will still have to pay tax, corp tax plus tax on divs etc or PAYE over any allowance you have but its a lot better deal than being sole trader.

drb5

iTrader: (4)

Thanks Billy. Will definitely do that.

Chris, it's a particular type of golfing brand. Prices can start from £10, to many k's of £'s. The more expensive stuff appears to take it's time to sell(understandably), but there's a few items around £100-200 and they turn around fairly quickly(getting faster due to guarantee that they are legit and word travelling that there is a supplier of these items), but right now, i only have around 40 items(total) for sale and for ANY shop, that just isn't enough IMO, thus the need for more stock.

It's not a cheap bracket to start up, but I am the ONLY supplier ATM and that's why I see me winning...hopefully!