Monday, 28 January 2013

Business: Why Should I Bother to Save?

 It is still very hard to start up as self employed or freelance at the moment. You need to do more than ever to prove you are worth investing in! Savings will not only help you in during the bad times but could also help you access the cash you need to grow your business. Find out how via the advice of our guests below.

 Today we are chatting about the benefits of having savings and putting money aside. The interview features Ed O'Neill MD at English in Newcastle (@enginnewcastle) and Louise Hardy from the BIC (@northeastbic).

Not got time to read? You can hear all of today's interviews plus more via the AudioBoo Channel

Why you need to have savings?

Listen to this part of the interview via the audioboo player.

Ed: "There are always things to pay for and it is important to save for those times. The tax bill always comes when I am not busy (a slower time of the year) so money in reserve is good".

On this issue Louise points out that it is easier to save in dribs and drabs then have to “pull it out at the in one go".

Louise continues: "On a personal note I always feel it is less painful to pay tax bills in dribs and drabs putting money away on a monthly basis. I’m not sure why but it feels like I’m paying less. I'm not! But it tricks my mind into feeling a tad better about it".

How to save:

Listen to this part of the interview via the AudioBoo Player

Ed: "You really don’t know what is round the corner. Cash flow goes up and down, (For me) summer is high but November and December is slower so you need money saved up for those months".

Louise: "You need to make hay when the sun shines. If you do have some spare capital during your busy period I would defiantly suggest putting money away on a weekly on monthly basis. Unfortunately VAT, tax and other things will always be there and you will always be better to have money to fall back on".

Is getting credit not easier than saving?

Listen to this part of the interview via the AudioBoo Player

Louise points out that the problem with credit is you often get it when you have money. However the problems arise when bad times come and you find yourself with no money. You then can can’t afford to pay the loan or credit back. "This can send you into an endless spiral".

Ed also points sates that finding credit and persuading lenders to part with their cash is one of the biggest problems a small business will face.

Storm clouds over Big Ben & the UK houses of Parliament

Why is credit so hard to get?
Hear this part of the interview via the AudioBoo Player

Louise: "The Government may have made money available to the Banks to lend to small & medium sized business but at the end of the day proof of a return is still what makes the difference between a yes or a no on a loan request".

Louise also stated, "the bank will always lend on the ability to pay back - regardless of government involvement... As an ex banker I know people will look at cash flow and ability to run your business.
If you don’t have proof of cash flow and show an ability to pay back you won’t get a loan. It’s a catch 22 situation, as a new start up you can’t show what you have done over the last 12 months and therefore you don’t have the history to prove you can pay a loan back".

However, its not all bad news as having savings can help you attact a loan. Louise explains, “if you can get into a habit of regularly saving it gives them (the lender) a guarantee that you have steps in place at the beginning”.

Let me know if any of that helps.

Many thanks,


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