Author: f28admin

Businesses waiting for cheaper borrowing may need to reconsider their plans.

The Bank of England kept Bank Rate unchanged at 3.75% in September, but three members of the Monetary Policy Committee voted for an immediate increase to 4%.

The concern is inflation. UK inflation has moved above the Bank’s 2% target and higher energy costs are creating additional pressure. If those costs continue feeding through into wages and prices, interest rates may need to remain higher for longer.

For businesses, the important point is not to try to predict precisely what the Bank will do next. Instead, make sure that borrowing and investment plans remain viable under more than one interest-rate assumption.

A business considering new finance could prepare three forecasts. One might assume rates remain broadly unchanged; another could model a modest increase and a third could show the effect of rates eventually falling.

This can materially affect an investment decision.

A project that looks comfortably affordable if borrowing costs fall may leave little financial headroom if rates remain at present levels. On the other hand, an investment that still produces an acceptable return under a higher-rate scenario may be worth pursuing rather than waiting indefinitely for cheaper money.

Existing borrowing should also be reviewed. Businesses with fixed-rate loans approaching renewal need to understand what refinancing might cost. Variable-rate borrowing and overdrafts should be monitored because higher finance costs can gradually erode profit and cash flow.

The practical message is simple. Rather than basing decisions on hopes of lower interest rates, businesses should stress-test their plans.

Knowing what happens if borrowing remains expensive provides a much stronger basis for making investment and financing decisions.

The British Business Bank has launched a £210 million investment fund to help smaller businesses in the South East of England start, develop and grow.

The South East Investment Fund will offer loans ranging from £25,000 to £2 million, together with equity investments of up to £5 million. The area covered includes Buckinghamshire, Oxfordshire, Berkshire, Hampshire, the Isle of Wight, Sussex, Surrey and Kent.

Although this particular fund is restricted to the South East, British Business Bank-backed investment funds are now operating across every UK nation and region outside London. Businesses elsewhere may therefore find that comparable sources of finance are available in their area.

The announcement provides a useful reminder that funding should form part of a business’s wider growth strategy. External finance might be used to purchase equipment, recruit employees, develop a new product, enter another market or provide additional working capital.

Before applying, the owners should be clear about how much money the business needs, what it will be used for and how the investment will improve its performance. Borrowing more than necessary increases costs, while borrowing too little may leave a project unfinished.

The choice between a loan and equity investment also requires careful consideration. A loan will normally need to be repaid with interest, but the owners retain control of the business. Equity investment does not usually require regular repayments, although the investor receives a share of the business and may have a say in important decisions.

Prospective funders are likely to expect current management accounts, financial forecasts, a business plan and evidence that the owners understand the risks involved. Preparing this information can also help management decide whether the proposed investment is commercially sensible.

If you are considering raising finance, early planning is important. We can help you assess the funding requirement, prepare forecasts and present the financial case clearly to prospective lenders or investors.

Making a trading loss whilst not ideal can sometimes generate a tax refund. If you are a self-employed individual or a member of a trading partnerships, a trading loss can potentially be set against other income or capital gains. This can reduce the amount of tax payable and, where tax has already been paid, may result in a refund.

For the 2025-26 tax year that ended in April, a loss can generally be set against income for the same year or the previous tax year. This means a business that made a profit in an earlier year but has subsequently made a loss may be able to recover some of the tax previously paid.

There are restrictions. For example, the trade must generally be carried on commercially and for profit, rather than as a hobby. Other restrictions can apply depending on the circumstances, including where the individual works fewer than 10 hours a week on the commercial activities of the trade.

There is also a limit on the amount of certain Income Tax reliefs that can be claimed against total income. The limit is generally the higher of £50,000 or 25% of adjusted total income.

A loss can also usually be carried forward and used against future profits from the same trade.

If you have a trading loss, it may provide an opportunity to reduce an earlier tax bill, generate a refund or reduce tax on future profits. The rules can be complex, and we are happy to help advice you on the best way forward.