Blog - Acceler8me

Merchant Cash Advance: What is a Factor Rate?

A ‘Factor Rate’ of interest is a term normally associated with Merchant Cash Advance finance, or MCA for short. Merchant Cash Advance finance is when a business is able to borrow against the revenue forecasted to go through your Card Machines. For example, if you turnover £5,000 a month, you can borrow £5,000 from a lender, and pay it back daily from your takings.

A factor rate of interest is not expressed in percentages like standard interest rates but as a decimal figure. These will range from around 1.1 and even up to 1.9. This number represents the amount you will pay back on your loan

While factor rates sound straight forward, there is a lot you need to think about if you are thinking about applying for a merchant cash advance.

How Does a Factor Rate Work?

If your business is looking for a short term funding option, to boost your cash flow or to give you working capital quickly, a merchant cash advance could be a good option.

Unlike a standard loan, where you have a variable or fixed interest rate to pay back, MCAs or Cash Advance Loans, are calculated using a decimal figure that presents what times the loan you must pay back.

Other short term loans with Tier 3 or 4 lenders, might also use factor rates or buy rates to determine your total repayments.

Your factor rate is usually dependant on how long you have been in business and your average monthly turnover through your card machines.

Understanding Your Factor Rate

It is important to understand how interest is calculated on a factor rate loan, compared to a standard interest rate loan. Businesses don’t often think of this and can sometimes get very unstuck.

When thinking about Factor Rate loans, it is about determining what your total repayment will be.

For Example:

Say my business got a Cash Advance of £10,000 at a factor rate of 1.5 for a 12-month term.

The total amount my business will need to pay back is £15,000 (£10,000 x 1.5 = £15,000). Having the knowledge that you are paying £5,000 for that £10,000, at first glance, you might think you’re paying 50% interest rate for the short term advance.

However, this is the wrong way to think about this.

The total interest cost of the loan is 50%, however, when a factor rate is being used to calculate interest, it predetermines your interest in one lump upfront when the cash is advanced. An interest rate loan (APR), may have the same interest rate, but the interest is calculated on what is left owing on the loan every month, rather than upfront at once.

For example, a £10,000 loan on the same APR (50%) as a Merchant Cash Advance Factor Rate (1.5) – would cost £2661.94, compared to the Factor Rate of £5,000.

Other things to be aware of with Merchant Cash Advances are are that they are calculated daily. In other words, if you have a cracking day, you will pay more of your loan back on that day, when compared to a quiet day. This could mean that your cash flow could again be stretched if you were relying on those busy days to fund you through a quiet period.

How Do I Apply for a Merchant Cash Advance

We help companies every month access MCAs around the UK. There a number of providers who offer this finance, which can make the market nice and competitive. These products are really good for small cafes, bars and other retail shops that have strong card sales.

To process an application, and help you find the best rate across the market, I will need the following documents:

Merchant Services Statements. Usually, between 3 – 6 months of statements from your card provider.
Business Bank Statements. I will need your last 6 months of company bank statements.
Years in Business. For most lenders, that would be competitive, I will require a minimum of one-year trading history.
Companies House Return. I will also require your last Ltd Companies return, filed with companies house.

At the end of the day, like with any finance, it is about risk. If a lender can see numbers that stack up, the cheaper the rate will be. If a lender is worried about your numbers or your industry, you might find your rates being higher.

Top Cashflow Planning Tips

Cashflow is often a massive headache for entrepreneurs, cashflow issues in the best cases mean that you can’t move your business forward and grow your business, in the worst case scenarios it can mean the collapse of a business. When businesses have cashflow issues it usually means that the money is coming and is due to arrive shortly but as the money is not here and now it’s causing problems for your business. Acceler8me offer consulting services for cashflow planning, that’s why we’ve taken it upon ourselves to give you some quick and simple tips for improving your cashflow.

Cashflow Planner

One of the first things you need to think about is creating a cashflow planner. If you have the budget for it it’s best to utilise cashflow planning software such as Unit 4, however you can also develop a decent cashflow planner yourself through spreadsheets such as excel with a close monitoring system.

Detailed Financial Monitoring

Monitoring your financial statements and invoices as closely as possible, if you notice a single bill that seems questionable, question it. If you were offered a discount for a product or service and the discount wasn’t applied make sure that it is applied. If you stopped paying for a service and are still being charged make sure you get a refund. The sooner you notice any financial discrepancies and the sooner you resolve them the better chance you have of getting your money back.

Getting Paid Faster

Often many businesses will allow their customers to pay a month after their services have been charged, whilst this may be standard practice in your industry if it is always best to get payment in advance. If getting paid retrospectively is normal in your industry then try and see if there’s any way you can get paid in advance by offering incentives such as discounts. This principle can also be applied when your customers pay month-month where you can offer them an incentive for paying annually. Furthermore if your customer is in debt to your company then apply a zero tolerance strategy, as a first point of call stop providing them with your services if it goes further you may need to contact a debt collection company.

Improving Supplier Relationships

Our last two tips for cash flow planning centre around your relationship with suppliers. Firstly if you’re using a lot of suppliers for your business it may be worth seeing if you can develop a relationship where they can offer you interest free credit and if they don’t, try to leverage them against a similar business that will. Finally when you’re buying an overstock of products which end up sitting in a warehouse for months try and rearrange your procurement strategy through your relationship with your suppliers to see if you can purchase smaller orders for similar rates.

Accerler8me offer consultancy for cashflow planning, contact us to find out more.

The Benefits Of CRM (Customer Relationship Management) from a CRM Consultancy

There are numerous reasons for using CRM tools though for many when they first encounter a CRM they are perplexed and overwhelmed by the tools available to them. Often there are teething issues where business managers do not know the best way to utilise a CRM system. Acceler8me is a CRM consultancy that’s why we’ve taken it upon ourselves to write a short blog piece of on the benefits of CRM.

Automating Your Business

One of the most important features of CRM’s is the ability to automate everyday tasks. A CRM system can be linked to your email address so that emails can be sent out to your lead and clients in an automated fashion. Whether that’s to remind them to pay a bill, to follow up on a lead reminding them of a proposal that you previously discussed or to let them know of a new service or product that you are offering.

And that’s not the only thing that CRM’s can automate if you need to send your clients regular invoices or reports a CRM can create these a lot quicker than developing them manually. The reports don’t necessarily have to be focused on your client’s business either, you can use the reports to see the progress of your own business and to ensure that you are reaching your targets and KPI’s.

Improving Time Efficiency

Another great feature of CRM’s is the amount of time it can save you, after all as the old saying goes time is money! If you’re able to save yourself or your marketing and sales managers from managing menial business tasks you free up there time to focus on the more important business-related tasks. Menial tasks also lead to workplace apathy and low morale by keeping your workforce focused on the more challenging aspects of your business you are keeping them motivated and more satisfied with their work.

Offering Great Customer Service

Last but certainly not least there’s the impact on customer service, as the name suggests customer relationship managers allow you to offer great customer service. What’s great about CRM’s is we are able to contain all of our client’s data at our fingertips, that means if you client needs any information regarding their business you’re able to provide it to them far quicker than if you did it manually. This increases your client’s loyalty and thus their retention and can win you more business through referrals. That’s not to mention the fact that CRM’s also allow you to keep track of any prospective clients or leads that are coming through to your business.

CRM’s are a great way to improve your business, if you need any help or advise with developing a CRM contact Acceler8me today.

Top Tips for Creating a Business Plan from Business Planning Consultants

Business Planning is the first and most important step in creating your business, as business plan consultants business planning is a skill we’re well acquainted with. Acceler8me understands that many business owners have trouble putting together a coherent business plan that truly encompasses all elements of their business which is why we’ve decided to put together our top tips for business planning.

Create a Business Plan for Your Business Not Your Investors

The first and most important point is you need to create a business plan that will act as a blueprint for developing your business, not something to wow investors and funding providers. It’s all well and good creating a business plan that looks great on paper but if it uses dubious data and details procedures that you have little intention of implementing there will be consequences. Firstly most investors can see through this kind of fluff and secondly if you get the funding but your plan is inherently flawed your business will have little chance of succeeding.

But Don’t Forget to Sell Your Business

Whilst you’re business plan should be created for your business, that doesn’t mean you should avoid pitching your business. Business is all about selling yourself and you need to make sure that every piece of data used and every graph created reinforces the reasons why your business is a good idea. When you state that your business sector is experiencing high levels growth explain how your business will capitalise on that growth. When your explaining your growth projections, justify why specifically your business will achieve those targets. When you talk about your competition make sure you illustrate why your business is unique and will overcome the challenges that your competition are facing.

Avoiding Waffle

With so many features that can exist within a business it’s easy to get bogged down in unnecessary details that will turn investors away from considering your business plan proposal. Investors like to look at businesses that are lean with minimal fluff. A business plan is not a time to demonstrate your skills and knowledge of technical terms, it’s a time to demonstrate to investors and funding providers that if they invest in your business there will be a benefit to them. The focus of your business plan should be on sales revenue, growth forecasts, return on investment and most importantly your unique selling position.

Acceler8me offers business consulting services to our clients to find out more please contact us.

Top Sales Strategy Tips from a Sales Strategy Consulting

Often we come across businesses with a great product or service but have a tough time selling their product due to a poorly constructed sales strategy. Acceler8me offer sales strategy consulting services for business that require help with their sales strategy. We often write blogs related to our services to offer tips and advice to our clients and prospective clients. One of the main reasons we do this is to demonstrate how we can be of service to your business, that’s why today we’ll be discussing sales strategy.

You can start talking about all the features that your business offers and the many tools that are available but if you’re not willing to state how it benefits your clients they will likely lose interest very quickly. If your target market is B2B then it’s about how your business will improve their business, if it’s B2C then it’s about how it will improve their lives. Whether that’s generating more income for their business or having a better well-being in their lives you have to sell the benefits of your business.

When you work in an industry for a while it’s easier to get so accustomed to the types of jargon that are used that often when you speak to your customers they won’t know what you are talking about. Understandably sometimes this is unavoidable however when you can avoid using jargon you should. Firstly make a list of all the main terms used in your business and think of a layman’s translation. Making a note of all the jargon terms used in your business will also help you remember which terms are likely to cause confusion. Meaning that you can look out for them in your sales pitches and pause and ask your prospective clients if they understand what you just said.

Over time when working in a specific industry you will notice the characteristics of your target market, studying these characteristics will help you realise the kind of etiquette that will be expected of your business. Finally last but certainly not least you need to understand that your leads have a million things they are thinking about and your business is often the bottom of that pile, you cannot expect them to contact you, you need to chase them up and make sure they remember about your business otherwise they’ll forget all about you.

Accelr8me offers sales strategy consulting to find out more contact us.

What is Development Finance?

While the name might seem intimidating, your first guess was probably right: development finance is the investment into building a business property or development. The reason why this is so popular is because once extensive work has taken place on a property or plot of land, it is worth much more in the future.

Once you decide to undertake a property development project as a business, you may realise that some funding is needed to achieve the results you need. If the project requires what is referred to as work from ‘the ground up’ and you are essentially buying a plot of land, it’s likely that you will seek out development finance from a lender to help with the cost of the building work. However, development finance can cover a number of different types of projects, which can include:

Residential properties
New-build
Commercial properties

What does it cover?

First of all, if you’re looking just to refurbish aspects of your business’ property, then you might not need development finance as such. For smaller refurbishments, you might need what is referred to as a ‘bridging finance.’ If you need a lender to pay for a generous proportion of a large-scale project, then development finance might be needed. For example, the lender might pay for half of the cost of purchasing the lot and then anything from 60 – 70% of the total building costs. The benefit of financing it this way is that the business taking out the finance does not need funding for the entire project; they get to finance for around half of the entire development. It’s worth remembering though that development finance covers part of an extensive project, not just feature work.

How does it work?

As with any business loan, you will need first to agree a set amount you need to borrow. Once you are accepted for this amount, you will begin paying it off in monthly instalments. In some respects, it’s a little bit like a mortgage – but not entirely. Unlike a mortgage, this is a short-term loan. Instead of the estate agent evaluating the value of the property, the lender will assess how much the property is worth and then agrees on a total. This total will also be partially based on the business’s finances, too.

Will I be accepted?

This all depends on the financial state of your business, and all your research beforehand. You will need to show any necessary planning permission, and ideally a property portfolio of previous, successful projects. On top of this, development finance is just like any other loan. You will need proof that the loan can be paid back, and that your company possesses a good credit rating.

Property development can be incredibly lucrative for many businesses, and undertaking a sizable development can come with a hefty loan to cover the costs. However, adding another example of your business’ financial prowess to your property portfolio could make taking out development finance a wise and fulfilling endeavour. As ever, it’s advised that you seek advice in terms of what is required from your company with paperwork and planning; don’t hesitate to contact us today for further guidance.

Commercial loans: What are The Pros and Cons?

If you are business and are considering taking out a loan to cover start-up, running or expansion costs, you may have some questions lingering in your mind. You might be wondering what the benefits and drawbacks of business loans are, and how this could directly affect your business.

Pro: Fixed and low-interest rates

One benefit of being a business, which is looking for a business-sized commercial loan, is that banks with reward you with low-interest rates which are set for a fixed period. The financial bonus of this is that you won’t see your business loan repayment total take exponential hikes every month.

Pro: You can predict how much you owe

When you take out a business loan, you will know exactly how much you owe each month. You will reach a pre-agreed payback rate with the lender, although there may be charges for repaying the total early. The reason for this is that lenders can make a loss by customers repaying the rest of the loan early. However, knowing you have regular repayments due makes paying back the total amount much more stress-free, and you can plan other business expenditures around it.

Pro: A secure, professional service

Receiving a business loan from an official professional lender should put your mind at rest when it comes to the security surrounding it. Applying for money from peer-to-peer lenders, for example, can be far less secure. If you are considering forms of lending like this for the low interest rates, it’s worth remembering that you won’t receive government protection from a peer-to-peer lender.

Con: Interest rates vary over time

Interest rates can be low on commercial loans, but this is sometimes determined by how well the economy is performing. The price of your fixed interest rate is essential to counter the cost of any future inflation. Your interest rate deal may very much be a product of the times, and not how well your business is performing.

Con: Collateral

Some lenders may ask for your business to list some assets, which they can then seize, as a consequence of you not repaying your loan. It can be particularly intimidating for new enterprises, which may be looking for a commercial loan to cover their start-up costs. Sometimes personal as well as business assets can be included in this.

Con: Start-ups will need to answer more questions

As anyone who has started up a business will know, part of the beginning process of a company will involve a lot of a lot of proving yourself. Unfortunately this applies to a commercial loan too, but hopefully, you will have anticipated this already. Getting your credit score checked, having a strong business plan, and proving your intentions to the lender will all help make this first step far easier. Yes, you will have some paperwork to do, and collateral may be part of it, but watching your business flourish should make it all worth it. Our business planning service can assist you in creating a great business plan, along with a financial forecast, which is incredibly integral for monitoring expected expenses and incomes.

As with any investment, there are some pros and cons to consider before signing the paperwork. However, when you take out a commercial loan, the chances are you’re doing it to secure the future of your business. With a practical strategy, and safety measures in place, you should soon begin to see your investment pay off.

What’s the Best Way to Secure a Business Loan?

For some, securing a business loan can be a vital way of temporarily paying for some of the daily running costs of the company. For others, it can be an exciting phase in the very beginning of setting up a business. Whether you’re a new business owner or someone who is looking to cover some overheads temporarily, you will still need to undergo the process of applying for a business loan. So, what can you do to make sure you secure one?

Have a set budget that you can stick to

To set a budget, you first need to determine what this loan needs to cover. A few considerations include:

The fundamental costs of starting it up in the first place
Overheads: how much it costs to run your business day-to-day
To get your business more prominent than it currently is

Once you’ve settled on what it is that your business loans need to cover, you’ll need to do the maths and figure out how significant an investment you will need to cover the costs. It’s also recommended that you decide what type of loan it is that you need to finance any of these issues.

What is your cash flow looking like?

Once you’ve worked out how much you need to borrow, you’ll need to be confident that you can begin to pay it off. Taking time to assess what your cash flow is like, and whether it’s enough to pay back the loan in instalments successfully, is a fundamental safety step. Our expert cashflow planning service is the ideal way to plan, monitor, and manage your business’s money effectively. What’s more, before approaching a lender, it’s also advised that you check your cash flow statement is accurate. You want to ensure that the process moves on as swiftly and smoothly as possible and removing any discrepancies can help secure your chances.

Check your credit score

For many businesses, this can be the real nail-biting phase. It can be especially hard if you haven’t been trading for very long, too. Before you begin researching the best business loans, it’s worth checking in with a service that checks your business’s credit score. If the result wasn’t quite as you’d hoped, you should seek out some tips on how to improve it. It’s also worth checking to see if public records of your business finances match your current financial status, as it’s likely that some lenders may review public data on how your company is performing.

What is a Non-Executive Director? An Introduction to Smart Money

In simple terms, a Non-Executive director is a senior business specialist who has a seat on the board of a company. They contribute smart money and to the growth of a business by providing their knowledge in a specific area. For a startup company, they could be an expert in finance or someone who can create sales or business for that startup and so on, this would all depend on what area of business your company is involved in and what stage of progress your business is in.

The Non-Executive roles are often given to people instead of money, they are often given equity for this role. If you are interested in hiring a Non-Executive director then the smartest way would be to offer them B class shares, this way, the shares mature as the non-exec has proven their worth, as the company will hopefully grow due to the Non-Executive being in their position.

They are also very handy when it comes to getting investment, due to the fact that they can make a team look a lot more experienced, and for very little in return. It’s also a great way to network as the more experienced they are then the more people in the field they know.

It’s very important to remember that although this is your business, there will always be people out there who know more than you, especially when you’re just starting off, you need all the help you can get! Every day will be a learning curve. Therefore, it’s essential that you surround yourself with people who can help you.

If you want more information on how to find and attract potential non-executives to work with you then you can read the following article here: (LINK TO ARTICLE).

At Acceler8me we can set you up with; meetings, networking events, and workshops that include more in-depth discussions regarding all the important stuff such as hiring staff, bringing on investors or Non-Executives etc, this could be extremely useful for you if you are just starting off and this is all brand new information for you, don’t panic we are here to help!

Get in touch today!

Brad Channer,

Director, Acceler8me.

Business Startup Grants – What Grants Are Available In The UK?

Too often people believe they are held back from setting up a business because they ‘just don’t have the money’. Years ago, having the money behind you to get started was crucial. Luckily, there are now tons of business startup grants out there to help those who just have great ideas and the drive to succeed in business. Granted, there is a lot more competition out there, as things have evolved, but there is also a lot more support in particular fields that will help you grow. Previously, The UK and Welsh Government provided grants for most businesses, however, this isn’t the case anymore.

These are just a few examples of certain grants in the UK; Innovate UK-, EU Jobs Growth (Backed up to 2020), Local council and borough grants, Princess and Princes Trust, Welsh and UK Lottery Funding, Arts Council funding, British Council Funding. There are also some Industry specific grants that cover; Film industry, Coal industry, TV technology, Social enterprise grants.

I know what you’re thinking; ‘Where do I start?!’. It may seem slightly overwhelming at first, but we are here to help. If you get in touch today we can assess your business plan and arrange a consultation to discuss your current situation, we can then help find you the perfect grant that will benefit your area of interest. We will even guide you through writing the grant application!

It’s important to understand that there is help out there, and remember; success in businesses doesn’t just benefit you, it also benefits the economy in the country. Therefore, government grants WANT you to succeed. If you dig even further there are even classes, training sessions and even boot camps that focus on young aspiring entrepreneurs to encourage them to set up their own business. It is much more encouraged and supported in the 21st century.

That being said, some people will still find more excuses such as; “I’m just afraid of failure” When really this is more of a confidence issue that everyone faces, however, in the business world someone who believes that much in their business WILL succeed, and sometimes will appreciate rejection, so they can take the feedback on board and come back fighting.

All it takes is one simple step and approach our consultation services and you are on your way to making your dreams come true.

So…now what’s holding you back?

Brad Channer,

Director, Acceler8me.