Professional loans for all year round

By Keith Sangwin, Asset Finance Sales Manager, United Trust Bank

Along with January, July is traditionally a busy month for tax funding. However, although these are potentially two of the most active months for professions brokers working with companies which still operate under a partnership structure, many specialist brokers understand that other opportunities abound throughout the year.

As more partnerships and LLPs convert to Limited companies, the spread of year-end dates and therefore due dates for tax funding requirements moves as HMRC generally requires payment 9 months after the company’s year-end. It can be difficult for many professional businesses to decide which type of company structure works best for them. Those that converted to a Limited company to take advantage of the lower taxation of company dividends came in for a shock when the Chancellor announced significant changes to the taxation of dividends in the last Autumn Statement. For many this materially changed the tax efficiency of their new company structure from the 6th of April 2016 and this could prompt a migration of businesses back to their LLP status.

As well as tax, many of the paper professions suffer from a real lack of cash due to the extended period of time it can take their customers to settle their invoices. Add this to the disbursements many legal firms have to pay in advance of any court dates and cash becomes a scarce commodity.

Some firms can manage these cash-flow spikes through effective management of their debtors and sufficient headroom within their overdraft facility with their bank. In many cases however, overdraft limits can be insufficient, especially when the case numbers are high and the firm’s main focus is on completing work and winning cases. As these types of invoices are not generally factorable, professional firms often approach a broker to find appropriate lenders, like United Trust Bank, to provide them with a suitable funding solution to match their specific requirement. Most are straightforward commercial loans over 12 months, but on some occasions, and depending on the loan purpose, these can also be provided over a 36 month period. Generally this is required when the practice is investing in case work, marketing, hiring or acquiring new revenue streams which will deliver a return over an extended period of time.

Sometimes cash flow requirements can be for a short period of time. For example, where a firm has a significant VAT bill due to HMRC but has debtor days of over 60 there can be a significant shortfall in cash. Funding VAT bills over 3 months can provide much needed relief to many businesses and allows for the repayments to be made more in line with the receipt of cash.

Finding the right funder with a breadth of experience in the professions market is key to obtaining the most appropriate solution.