Adventures In Micro-Business: 'Should I be renting?'

Q. I have some large contracts with big organisations but they are very slow payers. My bank is getting difficult about my overdraft - what can I do?

A. Your bank may well be the solution to the problem here. Most banks offer to lend you money against the security of "approved" invoices. This takes two forms: "invoice discounting" where you continue to chase your customers for payment but the bank advances you a percentage of the invoice value and "factoring" where the lender takes over the collection of the invoice but will still advance funds against it. Speak with your bank about the services they offer. You can get more information from the Asset Based Finance Association's website (www.abfa.org.uk). Finally, give some thought as to how you structure the payment schedules for large contracts. It may be sensible to request a component of the overall contract value up front to help protect against cash flow problems. Conversely, try and avoid too much being held back at the end of a contract.

Q. I intend to set up as a music teacher. What doI need to do in order to work from home?

A. Firstly, check with your mortgage lender or landlord to ensure they are happy for you to run a business from home. You may need to think about noise levels and talking to neighbours. In general terms, the Business Link website (www.businesslink.gov.uk) is an excellent source of information and its "business start-up organiser" should be very helpful. Your accountant will be able to advise on those things that are specific to your business and to help with formal registrations.

Q. I am just starting a business and would like advice about banking. I intended to stay with my current bankers but is it worth shopping around?

A. Certainly talk with your personal bankers but do shop around. Most banks offer very similar services and so choice of bank often revolves around personal relationships. High on your list should therefore be the availability of a "relationship manager" at the bank. However, before talking with any banks you should prepare a business plan and a business budget since the "financials" will form the basis of banking discussions. And before speaking with bankers it would be sensible to discuss those financial forecasts with your accountant. Do ask your accountant for recommendations too. Finally, don't be afraid to move banks if you are unhappy with the service provided but always give a bank the chance to explain if its service falls below expectation.

Q. Friends in business have said that I should "rent rather than buy" which is at odds with how I handle my personal finances. Why is the rule different in business?

A. It is true that businesses can come unstuck if they tie up cash in assets. This is because a business needs operating cash to function. Additionally, things such as vehicles depreciate in value from the moment you purchase them and so you cannot recover the full cash if you sell the asset.

Questions please