Many business owners and management teams will have noticed in the recent budget, the announcement of a new ‘super-deduction tax incentive’, which for qualifying assets (notably Plant & Machinery), companies can claim 130%, offsetting their profit and therefore corporation tax bill.
This is a positive step from the Government but as the article touches upon, this action will have to be complimented by other measures to boost confidence and support economic growth.
To date, one such measure was the launch of CBILS loans which will have helped facilitate investment in Plant & Machinery with arrangement fee and interest met by the Government in the first 12 months. It is important to note, that this will be ending later this month. The Recovery Loan Scheme (CBILS 2.0) whilst similar in nature, will mean the business must pay any arrangement fee and year one interest.
You may have read my recent blog post on HMRC’s move to preferential creditor status and the impact of this move on a Bank or other Asset Backed Lender appetite to advance monies, under floating charge security (Debenture). With a rapid roll-out of the vaccine programme, major markets recovering, Make UK has upgraded its growth forecast for 2021 from 2.7% to 3.9%. Naturally, this can lead to large working capital demands.
This is a nice problem to have but can create its own challenges regarding investment and cash constraints. And let us not forget, this on the back of a turbulent period for many with modest cash reserves / decimated balance sheets carried over from 2020.
For some businesses where balance sheets are overwhelmed with debt, the answer might be equity injection, for others, there is the opportunity to complement existing facilities with a cashflow loan for growth over a term of up to 8 years.
Unlike 2008/9, where there were few in the space between traditional high street bank and Private Equity, now there is a large number of liquidity providers/specialist lenders sat between the two.
If finance constraints are holding you back from investing in your business, please do to get in touch. I would be delighted to have a conversation.
With investment intentions remaining in negative territory, the Chancellor’s recently announced super-deduction tax incentive presents a real opportunity for those manufacturing firms with access to finance to bring forward investment plans into the qualifying period and boost their productivity.