When starting a new business most people will need some sort of capital to pay for things like, advertising, equipment and stock. They will either finance it themselves by using savings, borrowing it from family or through personal/business loans. My favourite way is through grants, simply because if things don’t work out you don’t have to pay them back.
When starting your business and looking for grants you must remember one thing. The vast majority of grants available are for business start up. After you start up in business there is virtually no financial support available. A lot of disabled entrepreneurs I work with have trouble with this concept. They write their business plan, list the items they need and look for the grants to buy them. Once they have matched the grants to the equipment they need, they stop looking.
This is a big mistake, pre-business start up gives you the greatest chance of getting your hands on some free money. Many disabled entrepreneurs don’t look ahead and think about the things they might need in the future. A year down the line they might want a website, PC or newspaper advertising. These are all expenses they will now have to fund themselves which will come out of their profits. If they thought about how their business might develop they could have put a grant application in for these items and got them when they started up.
So, before making that leap into self employment make sure that you have fully exhausted any grants available, because once you start your business, you might find that financially, you are on your own.
For a disabled entrepreneur grants for starting up in business can be few and far between. Even if grants are coming at you from all angles it’s extremely important to prioritise the items you need and match the item to the funder. For example some granting organisations will not pay for motor vehicles and only grant IT equipment. If you need a business grant for a van then make sure that you are not applying for a website via the only organisation who will give you a grant for a vehicle.
In my other article Looking for grants guide for disabled entrepreneurs I talk about how you should contact as many granting bodies as possible. I would then make a wish list of all the items I need to start up in business and prioritise them with the most important at the top of the list. I would then try and match the item with the grant provider to make sure I had everything covered.
It’s worth asking the business grant provider what they do and do not offer grants for. Not only will it give you a better chance of getting everything you need, but it may also increase your chance of getting the grant, especially if it’s something they usually fund.
In the past organisations such as the Prince’s Trust gave grants and soft loans to fund a vehicle. Your Disability Employment Adviser may have a discretionary grant which was traditionally used to fund clothing for people who did not have the finances to buy something suitable for an interview. Other uses for the grant would be to purchase tools for jobs which required the person to have their own set. Now disabled entrepreneurs are taking advantage of this grant when they start up in business, suing it to fund specialised safety clothing required for their new business. By matching the item to the grant, you can increase your chance of getting what you want.
Guess what? Everyone wants free money! And one way to get it is a business grant. As I have discussed locating a business grant can be difficult if you don’t match anyone’s criteria. Being eligible to apply for this “free money” is only the first hurdle in the race to claim your prize. Applying for a business grant can be a long and laborious process with many hurdles, and it’s not only you in the race.
Other entrepreneurs are gunning for these grants, armed with a business plan and determined to get their share of the pot. It’s worth remembering something; these grants are only available for a short period of time or even stop once the pot runs out.
It can be a case with these grants of who shouts loudest will get the grant. An entrepreneur can greatly improve their chances of getting the amount they need by working closely with the grant company and contacting them for regular updates.
Every grant provider will want a business plan and a list of all the items you need. The problem is each provider may want to see something different in each business plan. It’s not uncommon for an entrepreneur to be applying for several grants, working with several organisations and having several versions of the business plan.
This is where the hard work comes in and you realise that there is no such thing as free money. It can be quite demoralising if the business plan you have slaved away on is not what is required to get the grant and when you have got it right for that organisation, another granting body may want you to make changes. Don’t take this personally, every person reading a business plan will expect something slightly different and will want you to make changes. You will save yourself time by listening and working closely with the organisation and making the changes as quickly so that you don’t delay the process.
As I have said, with some of these organisations it can be a case of who shouts the loudest wins, so you can’t afford to sit back and wait for things to happen. Phone for updates regularly and ask them if they need anything else to process the application. You never know, applications for business grants sometimes get lost so it’s worth a phone call to check everything is in place.
All in all applying for business grants can be a time consuming process, but that’s the price you pay for “free money”
Soft loans are another source of finance when starting up a business. I would always advise people to first try and obtain a grant but if your business has a large amount of start up costs then a soft loan may be unavoidable.
For any disabled entrepreneur taking on a loan should not be done lightly and careful consideration should be given to the interest, the size of the repayments and the overall cost.
Soft loans are usually offered to disabled entrepreneurs by national and regional organisations like the Prince’s Trust and charities who work with the visually impaired, deaf, those in wheelchairs etc.
A soft loan is like any other loan, such as a personal loan or a business loan offered to a person with a disability. Basically you borrow an amount of money to eventually pay back, in regular payments, plus interest. The main differences between a soft loan and a regular loan are;-
1. Soft loans tend to come at a lower rate of interest than your standard business or personal loan. On some soft loans rates are even at 0%, but often there is an administration fee.
2. There is usually a holiday period from when the loan hits your bank account to when you have to start your first payments. This can be up to 6 months.
3. Sometimes organisations supporting the disabled entrepreneur will offer holiday periods if the person gets into trouble paying back the loan. This can be useful to a person with disabilities if their business is on a downturn or illness is dictating how many hours they are working.
4. The biggest advantage of a soft loan is in some circumstances if the business stops because of ill health or lack of business, it can be possible for the debt to be written off by the organisation who granted it. This would be at their discretion and the person with the disability would have to show that they have really tried to make the business a success.
The other thing to remember when being granted a loan is to include the repayments into your business plan and cash flow. This way you will be able to see if you can really afford it.
Starting a business is tough! Thankfully there are different government schemes available designed to financially support a disabled entrepreneur when starting their own business. Entrepreneurs now (if they are eligible) have several options for financial support when running their business. Schemes such as Test Trading, Permitted Work and Working Tax Credits are the main three schemes that entrepreneurs join to get financial help when they first start their business.
If a disabled business person is eligible for all three schemes, then some time must be given to consider which is the most suitable for them and the business. Each one has advantages and disadvantages, the wrong choice could mean missing out on grants and other financial support.
Test Trading
Advantages
1. You can stay on your benefits whilst testing your business idea for up to 6 months.
2. After the 6 months if you decide to go back on your benefits there is a smooth transition back to your existing level of benefits.
3. You are eligible to apply for Access to Work.
4. You will be allocated a business mentor to help you develop the business.
Disadvantages
1. You will have a joint bank account with the provider of Test Trading. These providers are usually flexible but it could mean a delay when you want access to your money. This may not affect a lot of businesses, but if you need money quickly for a contract and it’s out of office hours, then there could be a problem.
2. You may not be eligible for grants that are only issued when you sign off your benefits.
Permitted Work
Advantages
1. You are eligible to apply for Access to Work.
2. You can trade whilst still receiving your benefits
3. You can stay on the scheme for up to a year
Disadvantages
1. You can only trade for 16 hours
2. You can not earn over £88.50 profit without it affecting your benefits
3. You may not be eligible for grants that are only issued when you sign off your benefits
Working Tax Credits
Advantages
1. You could receive a payment that totals over your current level of benefits.
2. It is possible to stay on the scheme over a year.
Disadvantages
1. Receiving Working Tax Credits may affect other benefits, lowering your overall benefit income
2. At the end of each year you will be reassessed, which will involve the completion of documents.
As a small business owner how satisfied are you with your bank? Is the service you are receiving adequate or are you totally unhappy? The Disability Discrimination Act (originally of 1995) should ensure that within reason you should receive access to your banking requirements. Given the ‘Credit Crunch’ banks are under pressure to cut costs to shore up their balance sheets. Borrowing from a bank may become more expensive and the service may become affected.
Here are some basic points to consider when evaluating a bank’s service:
A Limited Company must open a business account. Sole Traders may use their personal current account for business activities.
You should consider a bank which has a dedicated small business team and enquire whether there are facilities for your disability. This may be for example if there is a disability officer available to provide you with dedicated support or if there is wheelchair access at your local branch. Try to ascertain how many businesses your bank manager or bank advisor looks after and try to ascertain if you will be dealt with face to face at the bank or through a call centre. If you have straightforward requirements another option is to use internet banking if you are able to use access technology.
Does your bank manager know the requirements of your business? A good bank manager will spend time getting to understand your business. You should be able to make contact as frequently as you require and each contact should add value to your business. A good bank manager may be able to make valuable business introductions on your behalf.
What are the interest rates on business and business savings account? For borrowing facilities there are sources of funding other than banks. Sources such as family and friends, regeneration funds, equity funds from business angels, factoring, asset finance, invoice and trade finance, equipment leasing, stock finance and payroll finance all have pros and cons which merit investigation dependent upon individual business circumstances.
Check the fixed charges the bank levies on business accounts for transaction fees and overdraft fees. Check if there is a fee-free period for new customers. Does the bank offer other services such as credit cards, charge cards, free statements and do you need them?
The Forum of Private Business conducts a bank survey among 5,000 small firms every two years. The Report Private Business assesses banks across the following 18 factors:
whether knows business, knows industry, knows market, offers advice, range of services, availability of credit, competitiveness of interest rates, competitive charges, realistic collateral, tailors finance, deal with one person, access to loan officer, speed of decision, efficiency, reliability, friendly staff, convenient location and convenient hours.
The top 9 banks of the survey, with AIB ranked first and Barclays ranked ninth, were:
1. AIB
2. Yorkshire
3. Clydesdale
4. HSBC
5. RBS
6. Bank of Scotland
7. NatWest
8. Lloyds TSB
9. Barclay
Correct for 2004
Access to Work is a government funded body whose remit is to support disabled people retain or access employment. If you are registered as self employed with the Inland Revenue or own a limited company. You can apply to them for assistance. How can they help? They can help fund the following.
• Adaptive and supportive technology
• Environment adaptations
• Employer training and awareness
• Employee training
• Mentoring
• Travelling to and for work
• Readers and support workers
For small business owners the prospect of approaching and dealing with a government department can be daunting, slow and lengthy process.
Here are a few simple guidelines that may help.
• Always remember that any assistance asked for must be based on your disability needs not on your business needs.
• Research the supportive technology that suits your needs before applying, so as you can give a clear picture of the help you need.
• If you are a business start up prepare a business plan, if your are already in business you may need to supply accounts or proof of earnings
• If you are applying for help with travel or a support worker as a self employed person or business start up, your needs may vary over the course of a year, so prepare a snapshot of the assistance you need based on your busiest month
If you do seek professional advice from specialists, such as business advisors in helping you apply to Access to Work. Make sure they have experience in this field and that the advice they give is based on your best interests not on any government or local government contracts they maybe tied to. It’s always a good idea to ask, if they are members of a professional body and have a code of practice.
Test trading is a government initiative to help entrepreneurs come off benefits and become self employed. The leap into self employment is a bold move for any disabled person on benefits, as recent Government policies on benefits have made some disabled people nervous about the future. In recent years people who have come off their benefits to go on Government schemes have found it difficult to get back on the same benefits they were used to. This uncertainty has led many disabled people to be distrusting of Government schemes aimed to help people back into employment.
Test Trading is a scheme which assists with this problem. By joining the Test Trading scheme an entrepreneur can effectively trade for 6 months and still receive their benefits. At the end of the 6 months the person can decide whether to stop trading and remain on their benefits or to carry on trading and come off their benefits. There are some advantages and disadvantages we will discuss later.
To join the scheme budding entrepreneurs will need to contact their DEA Disability Employment Adviser to find out if Test Trading is available in their area. If the scheme is available then your DEA should signpost you to your nearest provider, who will enrol you on the scheme.
There are 3 stages to Test Trading
Stage 1
This will be a meeting between you and a business adviser to discuss your business plans. The adviser will give you support in writing your business plan and will assess what other support you may need.
Stage 2
At this stage you will be developing your business plan, looking for grants and applying for Access to Work.
Stage 3
This is where you will start your business and have your full benefits for 26 weeks. There will be continual support from your business adviser on a weekly basis, via face to face meetings or via the telephone.
Hopefully at the end of the 26 weeks your business will be stable enough to support you and you will come off your benefits.
Before you finish Test Trading you will need to work with your DEA to see if you are eligible for Working Tax Credits, which could offer you further financial support. Test Trading is just one route a disabled person can take when wishing to start up in business. Permitted Work from the Job Centre, Working Tax Credits and starting a Limited Company are other ways to gain financial support whilst starting up in business.
Return to Work Credit is available from Job Centres in the “Pathways to Work” areas (ask your Disability Employment Adviser if you qualify). It is a tax free payment of £40 directly into your bank account for up to 52 weeks. This could mean a disabled person starting their own business could be in line for a payment of £2080 whilst they are on other government schemes. Read my article on Test Trading, Working Tax Credits and Permitted Work.
Usually a person will qualify for Return to Work Credit if;
1. They have been claiming one, or any combination of the following for 13 weeks or more;-
Incapacity Benefit (including credits only)
Income Support (because of your incapacity)
Severe Disablement Allowance
Statutory Sick Pay for 13 weeks or more and now claiming any of the above benefits
2. They are working more than 16 hours a week.
3. They expect a personal annual salary before deductions to be £15,000 or less per year (What you are paying yourself?).
4. They expect the business to last more than five weeks.
Return to Work Credit is a great way of contributing to your wage when on Test Trading or claiming Working Tax Credits. Many disabled entrepreneurs manage on these schemes during the first year of trading. This gives their business a great chance of survival, plus they can concentrate on running the business instead of stressing about how they are going to pay themselves.
A disabled person can apply for working tax credits if they are over 16 years of age, working over 16 hours and will be in business for at least 4 weeks. Most disabled entrepreneurs will qualify for these credits but often don’t apply, as they are worried that in the initial stages of business they will not be working for 16 hours. They think this because they only count the hours they are actually with a client. They should also be counting the hours marketing the business, going to suppliers, doing the accounts etc. All these tasks are included in calculating the total number of hours.
Before starting the business I would contact my Disability Employment Adviser or Working Tax Credits Department and ask that they to do an assessment of how much I would be entitled to. Working Tax Credits are calculated on either your income for the previous year or a prediction of your wages for the year of trading. Most people choose to have the calculation done on what they earned last year as in most cases, this will be the amount of benefits received and should make them eligible.
The amount of Working Tax Credits can vary, but in most cases it’s roughly the same as your current benefits. After you have been trading for a year on your WTC you will have to submit your earnings to see if you qualify for the next year. As most businesses do not make a profit in the first year it is likely that you will be able to stay on the WTC for another year. This will give your business time to get established before you have to take a wage from it. Read my article Working Tax Credits Vs Test Trading Vs Permitted Work to see which scheme could be best for you