There are many differences between being an employee and running your own business. One of the most significant is the way in which your personal and business finances become intertwined when you’re a start-up founder.
That means you have to start thinking differently about your money when you’re a business owner. From arranging your own pension to understanding the financing possibilities available to SMEs, it’s important to have a grasp of the options available.
Speaking to an adviser is often crucial to gaining a greater understanding, which is where your St. James’s Place Partner can help. In this article, we answer some of the key questions about finances in the early stages of building your business.
Should I use my own money to start a business?
Most entrepreneurs will use at least some of their own money in the early days of their start-up.
Many will choose to ‘bootstrap’ their business for as long as they can, meaning they use their existing finances – such as savings and personal loans – to support the company. As it begins to grow, it’s possible that an injection of external funding can boost expansion more effectively than bootstrapping.
What are the external financing options once my business is up and running?
Ian Wood is Marketing Director of Capify, which provides flexible financing solutions to SMEs that have been trading for more than a year and have a minimum monthly turnover of £10,000.
He says: “Business loans are the most common and well-known route – often from a traditional lender such as a high-street bank, but more frequently from alternative lenders, such as Capify, which offer short-term funding that is typically paid back via either daily or weekly repayments, making the management of cash flow easier.
“Other options to be considered include invoice finance, a facility helping businesses leverage their unpaid bills for an instant cash injection; and asset finance, using a firm’s balance-sheet assets as security to borrow money. These are often popular in sectors such as construction and manufacturing.
“Another possibility you may consider is a merchant cash advance – a flexible and unsecured short-term loan in which an upfront sum is given in exchange for a percentage of future sales – this can be daily, working with the cash flow of a business.”
How do I find business finance in the COVID-19 economy?
The impact of COVID-19 has been harsh on businesses across all industries, yet many have found support through external finance – either through government or private-sector channels.
“COVID-19 and Brexit have led to a challenging environment for many business owners,” says Wood.
“Additionally, there’s sometimes still a bit of a culture and attitude that sees borrowing finance as something that should only be done when there is an issue, such as cash-flow difficulties.
“However, the pandemic may have altered some of that perception, not least given the vast numbers of businesses that have accessed finance over the past two years – many for the first time.
“In fact, borrowing to fuel growth and scale more quickly is now seen as a brilliant way to use finance.”
How do I keep my personal finances secure while running a business?
It’s important to balance the need for ready cash for paying bills, your mortgage and unexpected expenses with the need for long-term planning, such as saving for retirement.
Many first-time entrepreneurs do not think to take out life assurance or income protection insurance. However, for a relatively small sum, such cover will provide peace of mind should the worst happen, or if your business takes an unexpected downturn.
Do I need to start my own pension?
Paying into a pension is a tax-efficient way to extract funds from your business and an essential part of planning for your future.
Some entrepreneurs choose to make their business their pension, but this is a risky strategy because it relies on being able to sell it for a price that can fund your retirement. For most SME owners, the safest and most efficient way of saving for your twilight years is through a personal pension that you pay into via your company.
“If you’ve set up a limited company, it’s even simpler to set up a pension,” says Claire Trott, Divisional Director – Retirement and Holistic Planning at St. James’s Place. “Just make sure you pay into the pension through the company, because it’s the most tax-efficient way of doing it.”
Seek advice
When thinking about how to structure your personal and business finances, it helps to take expert advice. Speak to a St. James’s Place Partner to determine what might be the best options for you and your business.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
There are many differences between being an employee and running your own business. One of the most significant is the way in which your personal and business finances become intertwined when you’re a start-up founder.
That means you have to start thinking differently about your money when you’re a business owner. From arranging your own pension to understanding the financing possibilities available to SMEs, it’s important to have a grasp of the options available.
Speaking to an adviser is often crucial to gaining a greater understanding, which is where your St. James’s Place Partner can help. In this article, we answer some of the key questions about finances in the early stages of building your business.
Should I use my own money to start a business?
Most entrepreneurs will use at least some of their own money in the early days of their start-up.
Many will choose to ‘bootstrap’ their business for as long as they can, meaning they use their existing finances – such as savings and personal loans – to support the company. As it begins to grow, it’s possible that an injection of external funding can boost expansion more effectively than bootstrapping.
What are the external financing options once my business is up and running?
Ian Wood is Marketing Director of Capify, which provides flexible financing solutions to SMEs that have been trading for more than a year and have a minimum monthly turnover of £10,000.
He says: “Business loans are the most common and well-known route – often from a traditional lender such as a high-street bank, but more frequently from alternative lenders, such as Capify, which offer short-term funding that is typically paid back via either daily or weekly repayments, making the management of cash flow easier.
“Other options to be considered include invoice finance, a facility helping businesses leverage their unpaid bills for an instant cash injection; and asset finance, using a firm’s balance-sheet assets as security to borrow money. These are often popular in sectors such as construction and manufacturing.
“Another possibility you may consider is a merchant cash advance – a flexible and unsecured short-term loan in which an upfront sum is given in exchange for a percentage of future sales – this can be daily, working with the cash flow of a business.”
How do I find business finance in the COVID-19 economy?
The impact of COVID-19 has been harsh on businesses across all industries, yet many have found support through external finance – either through government or private-sector channels.
“COVID-19 and Brexit have led to a challenging environment for many business owners,” says Wood.
“Additionally, there’s sometimes still a bit of a culture and attitude that sees borrowing finance as something that should only be done when there is an issue, such as cash-flow difficulties.
“However, the pandemic may have altered some of that perception, not least given the vast numbers of businesses that have accessed finance over the past two years – many for the first time.
“In fact, borrowing to fuel growth and scale more quickly is now seen as a brilliant way to use finance.”
How do I keep my personal finances secure while running a business?
It’s important to balance the need for ready cash for paying bills, your mortgage and unexpected expenses with the need for long-term planning, such as saving for retirement.
Many first-time entrepreneurs do not think to take out life assurance or income protection insurance. However, for a relatively small sum, such cover will provide peace of mind should the worst happen, or if your business takes an unexpected downturn.
Do I need to start my own pension?
Paying into a pension is a tax-efficient way to extract funds from your business and an essential part of planning for your future.
Some entrepreneurs choose to make their business their pension, but this is a risky strategy because it relies on being able to sell it for a price that can fund your retirement. For most SME owners, the safest and most efficient way of saving for your twilight years is through a personal pension that you pay into via your company.
“If you’ve set up a limited company, it’s even simpler to set up a pension,” says Claire Trott, Divisional Director – Retirement and Holistic Planning at St. James’s Place. “Just make sure you pay into the pension through the company, because it’s the most tax-efficient way of doing it.”
Seek advice
When thinking about how to structure your personal and business finances, it helps to take expert advice. Speak to a St. James’s Place Partner to determine what might be the best options for you and your business.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
There are many differences between being an employee and running your own business. One of the most significant is the way in which your personal and business finances become intertwined when you’re a start-up founder.
That means you have to start thinking differently about your money when you’re a business owner. From arranging your own pension to understanding the financing possibilities available to SMEs, it’s important to have a grasp of the options available.
Speaking to an adviser is often crucial to gaining a greater understanding, which is where your St. James’s Place Partner can help. In this article, we answer some of the key questions about finances in the early stages of building your business.
Should I use my own money to start a business?
Most entrepreneurs will use at least some of their own money in the early days of their start-up.
Many will choose to ‘bootstrap’ their business for as long as they can, meaning they use their existing finances – such as savings and personal loans – to support the company. As it begins to grow, it’s possible that an injection of external funding can boost expansion more effectively than bootstrapping.
What are the external financing options once my business is up and running?
Ian Wood is Marketing Director of Capify, which provides flexible financing solutions to SMEs that have been trading for more than a year and have a minimum monthly turnover of £10,000.
He says: “Business loans are the most common and well-known route – often from a traditional lender such as a high-street bank, but more frequently from alternative lenders, such as Capify, which offer short-term funding that is typically paid back via either daily or weekly repayments, making the management of cash flow easier.
“Other options to be considered include invoice finance, a facility helping businesses leverage their unpaid bills for an instant cash injection; and asset finance, using a firm’s balance-sheet assets as security to borrow money. These are often popular in sectors such as construction and manufacturing.
“Another possibility you may consider is a merchant cash advance – a flexible and unsecured short-term loan in which an upfront sum is given in exchange for a percentage of future sales – this can be daily, working with the cash flow of a business.”
How do I find business finance in the COVID-19 economy?
The impact of COVID-19 has been harsh on businesses across all industries, yet many have found support through external finance – either through government or private-sector channels.
“COVID-19 and Brexit have led to a challenging environment for many business owners,” says Wood.
“Additionally, there’s sometimes still a bit of a culture and attitude that sees borrowing finance as something that should only be done when there is an issue, such as cash-flow difficulties.
“However, the pandemic may have altered some of that perception, not least given the vast numbers of businesses that have accessed finance over the past two years – many for the first time.
“In fact, borrowing to fuel growth and scale more quickly is now seen as a brilliant way to use finance.”
How do I keep my personal finances secure while running a business?
It’s important to balance the need for ready cash for paying bills, your mortgage and unexpected expenses with the need for long-term planning, such as saving for retirement.
Many first-time entrepreneurs do not think to take out life assurance or income protection insurance. However, for a relatively small sum, such cover will provide peace of mind should the worst happen, or if your business takes an unexpected downturn.
Do I need to start my own pension?
Paying into a pension is a tax-efficient way to extract funds from your business and an essential part of planning for your future.
Some entrepreneurs choose to make their business their pension, but this is a risky strategy because it relies on being able to sell it for a price that can fund your retirement. For most SME owners, the safest and most efficient way of saving for your twilight years is through a personal pension that you pay into via your company.
“If you’ve set up a limited company, it’s even simpler to set up a pension,” says Claire Trott, Divisional Director – Retirement and Holistic Planning at St. James’s Place. “Just make sure you pay into the pension through the company, because it’s the most tax-efficient way of doing it.”
Seek advice
When thinking about how to structure your personal and business finances, it helps to take expert advice. Speak to a St. James’s Place Partner to determine what might be the best options for you and your business.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.