Tax breaks and funding with William & Petko Transcript

Greg Wilkes (00:01):

The construction industry can be a tough business to crack from cashflow problems. Struggling to find skilled labor and not making enough money for your efforts leaves many business owners feeling frustrated and burnt out. But when you get the business strategy right, it’s an industry that can be highly satisfying and financially rewarding. I’m here to give you the resources to be able to create a construction business that gives you more time, more freedom and more money. This is the Develop Your Construction Business podcast, and I’m your host, Greg Wilkes.

Greg Wilkes (00:35):

Nice to have a bit of a different podcast on today. So welcome to those that are joining us on YouTube or just listening. So we’ve got William and Petko. Have I pronounced that right? Petko?

Petko (00:47):

Yes.

Greg Wilkes (00:49):

Excellent. Two fantastic guys who are in the financial services industry. Now, the reason this is going to be a benefit to my listeners is because we’re all coming out of the pandemic and we’ve got a little bit of a mini boom happening in construction at the moment, but sometimes we need a little bit of support financially in order to be able to grow the business or just get out of the backend of this pandemic. You might need a bit of support to do that. So there’s a lot of confusion over what government schemes are available at the moment and what tax breaks and benefits there are. So William and Petko are going to clear all that up for us today and tell us how they particularly support construction companies with finances and funding. So over to you guys, William and Petko. So maybe you can give us a brief introduction on who you guys are and what got you into this industry.

Wiliam (01:38):

Yes, I’d love to. Greg, first of all, thank you very much for having us on. Absolute pleasure.

Greg Wilkes (01:44):

Excellent.

Wiliam (01:45):

What really got us into the industry? So I mean to start with I think it is all businesses have somehow been affected by Covid in the last year. And for me it was all about, I come from a commercial finance background and I decided to start my own business really with the sort of drive to get this information out to businesses. I think it’s so important at the moment that business owners, directors, accountants, are all aware of the schemes that are out there. And for me, I really enjoy helping people and I think there’s no better time than right now to help other businesses and just get out of this bloody awful pandemic and just move forward and push on. So that’s why I’m here.

Petko (02:43):

My background is a little bit different. So I’ve got a project management background, so I’ve got a master’s in business management and as Will said, we align on our core beliefs of helping people and making sure that we provide the greatest value and we decided to team up and see how we can make a positive impact in the world. And this industry gives us a real base to just to help organization, especially with the difficult time that they’ve had the last or 18 months now.

Greg Wilkes (03:18):

Yes, that’s absolutely fantastic. And at the end of the day, construction companies, specifically my niche, we do need help. It’s a tough industry to be in. Funnily enough, in the pandemic, a lot of construction companies that did do okay, they managed to ride through it out of all the industries. It wasn’t one of the ones that got closed down, but at the same time, there’s a lot of skilled labor that has left. Homeowners were a little bit tighter about what they wanted to spend. So the construction industry has taken a knock and people are coming out of the back end of that now and we do need support to be able to grow businesses. So it’s great to have you both here today just to help us discuss that. So a few things we’re going to look at today, two main issues. We want to know really what government schemes are potentially out there at the moment that construction industries can take advantage of, if you can help us with that.

(04:10)
And the second thing, we’re going to look at how companies can get some funding and finance if they want to be able to grow their companies rapidly. So I think you can help with that too. So just thinking about at the moment, so we’ve got, as we said, we’ve got a little bit of a mini-boom you could say in construction at this stage, everyone I speak to, all construction companies, they seem to be absolutely flat out, which is great. We need that. So what tax breaks or incentives are the governments currently offering for companies that want to invest in their companies and grow and take advantage of this mini-boom?

Wiliam (04:47):

So yes, actually really excited to start talking about this and just get the information out. But the main one really is super deductions. It’s got a sort of jazzy name, super deductions. It is pretty super. So the core of super deductions really is for a business owner, if you are planning on buying, let’s say you’re in construction, you want to buy some plant, you’ve got a hundred K purchase you want to make for that bit of plant, you can now deduct 25 P for every pound that you spend on an asset. So let’s say on that bit of plant that costs you a hundred thousand pounds, you can now deduct 25,000 pounds from your corporation tax, which gives you a saving of 25%.

Greg Wilkes (05:42):

That’s absolutely huge, isn’t it? And I don’t think we’ve seen a scheme like that recently, have we of such good tax deduction on that amount.

Petko (05:52):

I’ll give your viewers a different perspective. So as business owners, they’ll know that they submit their accounts at the end of the year, their accountant goes through certain procedures and they used to deduct 90% of all the purchase expenses. So an easier way to look at it rather than 19, at the end of the year you’ll get returned 25% of all your purchases. So any asset that contributes towards the growth of the business.

Greg Wilkes (06:17):

Yes, fantastic. So that’s a big boost, isn’t it? A significant difference.

Wiliam (06:23):

A key thing to note on that Greg, is even if a business owner decides to use asset finance to make that purchase, because obviously cashflow at the moment I feel like is absolutely the core of every sort of business owner’s thoughts at the moment. Even if you use asset finance on that a hundred kbit plant for example, you’ll still reap the benefits of that super deduction in year one of the agreements. So when your year end comes up, you don’t have to pay that asset off before you actually reap those benefits. You still get it in your first year end coming up.

Greg Wilkes (07:03):

So that massively helps cashflow, doesn’t it, in that first year. That’s a huge, huge tax break. So that’s really good. So why would it be a good time at this moment? Why would companies be considering doing this at this particular time? Is there any benefits to do it now?

Wiliam (07:18):

I think the answer to that is at the moment there’s a boom, take advantage of the boom and just push forward. Why not take advantage of it? It’s a big opportunity I think for business owners. If you are in that mindset where we are doing well, let’s take advantage, let’s grow, let’s push forward. You’ve instantly got an advantage over all your other competitors who are still sitting there thinking, well, not too sure what we’re going to do, let’s just ride it out. The key thing to note about asset finance as well is that the agreements are actually secured against the asset. So there’s minimal risk to the business owners

Greg Wilkes (08:00):

Right, that’s quite important.

Petko (08:03):

Being realistic, this pandemic is going to go away within the year or two, hopefully, fingers crossed. So at the moment, the government is incentivized to get the economy back to normal. They understand that they need to incentivize businesses that have developed and grown to spend within themselves. So it is just a no brainer to utilize the benefits from the government for this year as they’re out there because yeah, so next year these kind of incentives are going to go.

Greg Wilkes (08:32):

Well, that leads on to the next question. So at the moment, how long are they pushing this incentive for this super deduction?

Wiliam (08:39):

It’s 2023. You’ve got until.

Greg Wilkes (08:41):

Yes. Okay. So that’s quite a short window, isn’t it, that soon? That comes around pretty fast, really. So it’s really, now it’s a great time to be considering that if you’re thinking of expanding in your company, you want to get some plant or you want the business to grow and you need a bit of finance and funding to do that, then now’s the time to think about that super deduction. So that’s really helpful. If we focus on what the super deduction can be used for specifically relating it to construction companies, what sort of things could a company buy? What would qualify for this deduction?

Wiliam (09:14):

That’s a great question. So anything from company vans to company lorries to diggers, bulldozers, solar panels, computer equipment, it’s anything that actually generates the business revenue.

Greg Wilkes (09:34):

Right? Yeah. So that’s a massive list then, isn’t it? That’s really useful. So we’re potentially talking about, it doesn’t have to be, we mentioned earlier about spending a hundred thousand pound and making £25,000 back. If we’ve got construction companies that are listening to this that might be a bit smaller and they’re just thinking, I just need to buy a new truck or a new van for £10,000 pounds or something, it’s still going to apply to them too.

Wiliam (09:58):

Yes, exactly. And do you know, an interesting one is I feel like there’s still a little bit of a negative connotation out there that’s attached to finance. Maybe the mindset of if we’ve got the cash to pay for it, let’s use the cash to pay for it. But let’s just take an example of £100,000 for example. £100,000 in cash at the moment is a lot more valuable to a customer than it being spent on all of that £100,000 being spent on an asset.

Greg Wilkes (10:35):

Yes.

Wiliam (10:35):

And the way that asset finance can really help you grow is for that same £100,000, you could have 2, 3, 4, 5 assets and actually use asset finance as a tool to get more than one set of return on investment. Because if you spend that 100,000, you’re actually getting one set of return on investment and you’ve lost your £100,000. I could actually show you a PDF to go through it if you’d like to.

Greg Wilkes (11:04):

That’d be brilliant. I’ll tell you what, I’ve got that, because you shared that with me earlier, I’ve got that PDF here, so I’m just going to share that to my screen. So this is the illustration.

Wiliam (11:14):

That’s the one. Yes, that’s the one.

Greg Wilkes (11:15):

So this is great for those on YouTube that are watching, but for those on the podcast, we’ll just explain through as best we can. This diagram here, so go for it, William.

Wiliam (11:25):

Yes, so top, let’s just forget about the bottom half for a second and just focus on the top half. So how to grow in 1994. So a little bit of a sort of joke there, but in all seriousness, so on the left here you’ve got £0K, so that’s how much you’ve got left to play with. Let’s just say in this instance the customer’s got a £100K spend, they’ve it, they’re left with zero in the bank, they’ve made their purchase for their plant or machinery, and they’re now generating one set of return on investment.

Greg Wilkes (12:05):

So that plant’s out there working for them, but they’ve spent their £100K, so they, they’re making money from using that plant, but they’re left with zero in the bank until they’ve return investment starts.

Wiliam (12:18):

Exactly that. Let’s now look at the bottom half. So if that same customer with £100K in the bank decides that in actual fact they’re going to use asset finance to help themselves grow, each asset costs them £6K deposit. So they’re putting up three loss of £6k, which leads them with £82,000 in the bank, and then they’re buying three assets and they’re actually generating three times the return on investment. So not only are they left with £82,000 pound in the bank and three assets, they’re also going to receive, and this is key, a super deduction of 75,000 pounds when their next corporation’s tax is due.

Greg Wilkes (13:06):

So just to make that clear, then they’re buying, so this will be companies that aggressively want to grow and expand quickly. So they’re buying three pieces of plant a hundred thousand pounds, but they’re only putting £6K down and using asset finance to pay for the rest of the plant. Is that right?

Wiliam (13:24):

That’s exactly it. A good example that would be given here is if you were going to employ a marketing director and to do five years work for you, you wouldn’t pay that marketing director five years salary upfront. You’d pay that marketing director on a monthly basis whilst or he or she generates you revenue for the business. So it’s a similar concept.

Greg Wilkes (13:50):

Yes, that makes complete sense. Yes, this is really key. So I just want to just run through this again for my listeners. So if you are really interested in growing quickly now as Williams just pointed out there, you can go and spend your £100K, do it the old way you spend your a hundred grand, okay, you haven’t got any debt, but you’re only getting a return on investment for one piece of plant. That’s if you do it the old way. If you consider asset finance, you can literally get away with just putting down a smaller deposit. You could buy three pieces of plant. So in this example, we’re buying three pieces of plant at £6K each, so we’re only outlaying 18,000 pounds rather than £100K, and we’re getting three times our return on investment. We’ve got three income streams coming in and you get this huge super deduction at the end of your corporation tax year of 75,000 pounds on that purchase. Is that summed up right, William?

Wiliam (14:45):

Yes, that’s summed up right. And also for anyone out there that’s sort of thinking, well, it’s a bit of a risk, we’re not too sure how the next few months are going to pan out. As mentioned previously, the finance is secured against the asset.

Greg Wilkes (15:01):

So just to explain that a little bit more, if it wasn’t secured against the asset, what would that mean? What would it be secured against?

Wiliam (15:09):

So you can do a personal guarantee, a director’s guarantee or a company guarantee.

Greg Wilkes (15:16):

Yes.

Wiliam (15:17):

I think the key here is really with a positive mindset with ambition and wanting to take advantage of the current situation, there is no better way to grow than at the moment. Business owners have a massive opportunity at the moment to grow.

Wiliam (15:36):

I think anyone that chooses to go down this route has got a massive advantage of their competitors.

Greg Wilkes (15:43):

And I just want to just come back to the risk again. Obviously business is all about managing risk, isn’t it? If we’re going to grow, we’re putting things on the line to try and do that, but at the same time, as a business owner, you need to protect your own personal assets, your own house and whatever else if you’ve got family and whatever else. So if the debt is secured against the asset rather than as a personal guarantee or whatever else, you’ve got real protection there, haven’t you? So if things really did go wrong, it just didn’t work out for some reason it was a massive recession and something happened, an unforeseen event that happens, alright, you might lose the asset, you might lose a piece of plant, but you’re not losing your house over it. Is that a fair assessment?

Wiliam (16:25):

Exactly. Absolutely.

Greg Wilkes (16:26):

Okay, so that’s really important for Melissa to know. So that’s really good. So just looking at this as I’ve been a business owner myself in construction, and this obviously looks really sort of appealing. One of the barriers that is there that I would see as a business owner is getting the initial deposits together for buying this plant. So when I look at this, I think, well who’s got £100K sitting there anyway to go and buy a piece of plant out there? It is not that many people. So how would they start getting access to funding and deposits? How would your company help with that? Would there be a massive outlay that’s initially needed or what could you do to help with that sort of funding?

Petko (17:08):

So when we initially started our business, we kind of started with a partnership with an accountancy firm, which kind of gives us a great leverage of over 150 lenders, which it gives us the capacity to drive down the terms and rates for our customers. Most other brokers have less than a hundred. So having that capacity of lenders gives us a great opportunity for our customers to try different ones for them to make sure that we get the right requirement based on what they need.

Wiliam (17:45):

Yeah, I mean I think the key to note as well is that not in all cases you don’t have to put down a deposit. It’s quite flexible. You don’t have a deposit to put down, you don’t have to in terms of that side of things. Yeah, it’s very flexible. Like Petko says, we actually have access to 150 lenders. A good way to think about it is when you go to do your car insurance, let’s simplify this a little bit, but when you go to do your car insurance, you’d go through maybe compare the market money supermarket. The reason you’re doing that is because well you are comparing your prices against a great market share and that’s giving you the deal there and it’s our job as a financial intermediary to actually bat those lenders back and bring value to our clients. That’s what we are here to do to push back on the lenders and actually find the best rates, terms and ultimately deliver the best service our clients.

Greg Wilkes (18:52):

Yes, no, that’s really helpful. So obviously everyone’s circumstances differ. There’ll be some that can put down deposits, they want lower payments, but what we’re saying is you guys are pretty flexible. You’ve got a massive range of options out there. So even if someone was listening to this and thinking, I’d love to buy that piece of plant, I want to buy that JCB or I want to buy that wherever they’re going to buy, but I haven’t got a huge deposit to put down, but I’m really keen for business growth. Really they need to be talking to you guys just to think about what options are out there for them. They might not have to put anything down potentially, which is massive, isn’t it? That’s really helpful. So just shifting tactic a little bit, I think the super deductions that’s nice and clear for me and hopefully for my listeners now, I think that’s an absolutely fantastic opportunity out there that people want to take advantage of, but just want to shift focus a little bit. We’ve got obviously a lot of companies that at the moment they’ve gone and taken them out CBILS and bounced back loans, things like that.

(19:53)
So some companies have built up that. Some companies I know have tied themselves into really poor rates of CBILS stuff. They were just desperate to get whatever was out there at the time and they’ve got really poor repayment rates. And the difficult problem now is it’s coming to that time of year now where these repayments are going to start kicking in for some, it’s probably already started kicking in some, it might be a few months down the road and that’s going to really affect cashflow and different things. So just coming back to you guys about what support is out there at the moment, again, we’re talking about government schemes. Is there any other government support schemes out there that could assist construction companies at this time?

Wiliam (20:31):

Yes, absolutely Greg. So you’ve spot on there. We haven’t recovered from this pandemic yet. It is obvious we are on the uptrend. We’re moving forwards. I think personally if you ask me, I don’t think there’ll be another lockdown. I think that’s it. We’re going to push forward and I think coronavirus will become like another flu. But ultimately, for businesses, I think cashflow is important and like you say, making those payments. Many business owners have got those big capital and interest payments to start making. If you took a 250,000 pound seagulls for example, that might be anywhere in the range of maybe five and a half, 6,000 pounds a month, that’s a massive, massive payment that these businesses have to start making. So it’s a really good point. And the good news is that with the recovery loan scheme, which is actually another government incentive that’s been released to support businesses is that you can do, a lot of our lenders at the moment are talking about actually bringing a product to market that’s going to be interest only payments for 12 months.

(21:49)
The recovery loan scheme was mentioned on the first released on the 6th of April, but a lot of the lenders are still actually getting accredited by the British Business Bank. It’s not product available at the moment, but in the next few weeks there will be. So to give you an example, let’s say you took out 250,000 pound CBILS. You’ve got to start making your payments in let’s say June, July. You can then flip that over onto a recovery loan and make interest only payments for 12 months to help your cashflow. The good news as well is that recovery loan is 80% backed by the government. So they’re taking the risk away from business owners and saying, look, we understand will guarantee it for you. And yet you can flip that CBILS loan to recovery them.

Greg Wilkes (22:43):

So that’s fantastic. So potentially they’re delaying the capital payments for another 12 months. You’re literally only just paying interest for 12 months.

Greg Wilkes (22:52):

I think mean that is perfect, isn’t it, for companies that are just trying to get themselves back on their feet, but they’re not quite there yet. That could be a really good option for them just to assist with cashflow and get through the next year.

Petko (23:05):

That falls within this category as well. So if they’ve taken a bounceback line, which is a little bit less than 250, but still the government has understood that the support they gave last year, it kind of got everyone on the right track, but it’s not enough. So they’ve finally understood, let’s support the economy, let’s support the country, let’s give them another year on low-interest payments. And the good thing is the recovery loan is up to six-year term and the benefit is the money that, so for example, if you took a £50k loan, £50k bounce back, you can get the recovery loan, pay off that £50k bounce back loan and then the rest of the capital you can inject it on any part of the business. So whether it’s marketing, winning new contracts, so employees, so there’s no specific, they haven’t specified certain areas where it can be used so any aspect of the business can get utilized on.

Greg Wilkes (24:01):

That’s really helpful. So just to add too, I know this isn’t for you guys, so much more for my listeners. Obviously, the bounce back scheme, there are other options. So if you have got a bounce-back loan or a CBILS with your bank, they are offering things like pay as you grow and things like that and delaying the repayment. So none of us here are, I don’t think none of us are FCA. I’m not, certainly not FCA accredited. I’m not sure if you guys are. So any advice we are giving you here, we’re just giving you some options. We’re not giving you actual advice to take up on this. So you just need to speak to your accountants, speak to your banks, and before you go and take any of this up… Sorry, go for it.

Petko (24:46):

Reach out to us.

Greg Wilkes (24:47):

Leave up to you.

Petko (24:49):

Reach out to us.

Wiliam (24:50):

Exactly.

Greg Wilkes (24:50):

Reach out to you.

Wiliam (24:51):

I think it’s key to mention that we’ve partnered up with an accountancy firm called Sedulo who have got offices in London, Liverpool, Leeds, Manchester, and just upstairs we’ve got 20 accountants. So we’re up to speed on all of the government incentives and in terms of accountancy as well.

Greg Wilkes (25:15):

That’s really good to know. So if you’re listening to this and maybe accountancy isn’t your strong point and you’re really not sure what options to go for, then reach out to William and Petko and they’re going to just point you in the right direction.

Wiliam (25:28):

One thing to mention as well, Greg, I think this is key, is the recovery loan scheme way to look at it as well. It’s a big chunk of cash that can be used in the business for whatever you like within the business that’s guaranteed by the government. So it’s taking the risk away from business owners and they’re saying, here you go. If you want to invest within your business, if you want to grow it, take this, use it and grow.

Greg Wilkes (25:56):

Yeah.

Wiliam (25:56):

So it’s not just for the struggling businesses, it’s not just the businesses that haven’t done so well. It’s also for businesses that want to grow, that want to push the government, understand that look, the way to get the economy back on track at the end of the day is to help these SMEs grow because ultimately these are the people that are employing people that are paying taxes. So it’s the way to get the economy back on track.

Greg Wilkes (26:22):

Of course. Yes, that makes complete sense. And I guess this recovery loan scheme is a lot more flexible in some ways to the super deduction we’ve said, the super deductions to use for purchases like plant and whatever else. Whereas this could be used for anything, couldn’t it? If you just need it for cashflow or wherever it’s going to be, you can use that. What sort of amounts can you get on the recovery loan scheme? Is there caps or minimum amounts at all?

Wiliam (26:45):

Yes. So up to £250,000 backed by the government, but the actual amounts that you can get are anywhere from, I believe in the £10,000 range, up to £10 million.

Greg Wilkes (27:02):

Yes, that’s great.

Petko (27:03):

So the benefit of, so up to 250,000, there’s no guarantee from the business owner as well. So just like the asset, the super deductions is you guarantee on the asset anything below £250K, there’s no guarantee from the direct or the business on the amount.

Greg Wilkes (27:22):

Right. That’s quite significant then too, isn’t it? So yeah, that’s really interesting. Is there anything else here that needs to, anything we’ve not quite covered on these two things that you think is important for listeners to know?

Wiliam (27:37):

Yes, I mean I think lending is changing. There are lots of different products out there. It’s not just as simple as well as always lending money. There’s a lot of ways to release value from existing assets. For example, let’s say, just to give you one example, let’s say you’re a haulage firm. You own 10 trucks, you want a cash injection, you’ve paid for those 10 trucks, you need to get cash into the business. You can release equity from your assets and inject that into the business. So that’s just one example of a way that you can switch and swap values around within the business. It doesn’t always have to be a case of we need to borrow money or if you’ve got existing value within the business, you can also release that equity.

Greg Wilkes (28:31):

That’s really good to know. Yeah, that’s really important. So there’s a lot of options. So I think really that the crux of it is if you’re looking to grow as a business, you are going to need help financially to do that. It’s money and cashflow that’s king, isn’t it, really, to business grow. And if you’re going to do that, then really they need to come speak to you guys and work out what is the best way forward. It could be a recovery loan scheme, it could be using the super deduction or it could be releasing equity from the existing assets that you got. So lots and lots of options. But look guys, this has been really helpful for my listeners. So I really appreciate the time you’ve taken. Talk them through that. If anyone wants to get hold of you too, what’s the best way they can do that? How do we get hold of you?

Wiliam (29:16):

The best way I would say is probably just to give us a ring. I mean I’m sure you can maybe provide that information. Do you want me to give a number?

Greg Wilkes (29:27):

Say your number now?

Petko (29:29):

Also our name is Commercial City Group. We have a website if you guys want to go check us out. We’ll provide some details. Emails. Yeah, we’re looking forward to see how we can help any of your viewers clients.

Wiliam (29:46):

Yes, best way, go to our website. We’ve got our number on there. We’re always open to having a chat. Look, this is what we love, this is what we’re passionate about. I think you can probably tell from the other way we’re speaking and what not, that we are really passionate about it and we really believe in chasing value and adding value. That’s the most important thing at the moment to sort of help business owners get back on track. So if you just want to give us a call, have a chat about things, we’re more than happy to do that as well.

Greg Wilkes (30:16):

Yes, so I just want to thank you both. That was really refreshing. See two young lads hungry to help the construction industry. So this is going to be really useful for my listeners. So if you want some help, go and see William and Petko at the Commercial City group and that’ll be sure to sort you out. So that’s the end of this podcast. If you’ve enjoyed that, then please give us a like and subscribe and we’ll be back next time with another hot topic that’s going to help your business grow. Thanks guys.

Wiliam (30:45):

Thank you very much, Greg. Real pleasure. Cheers.

Greg Wilkes (30:52):

If you’d like to work with me to fast track your construction business growth, then reach out on developcoaching.com.au.