Boosting Your Limited Company’s Net Assets: Seeking Advice
Hello,
As the title suggests, I’ve been running a one-person limited company for the past 3.5 years, specializing in tech consulting. While I’ve experienced decent success—generating mid-six-figure revenues annually—my primary assets consist of just 1-2 computers that I’ve acquired.
Recently, I considered leasing a nice electric car through my company. However, I was informed that the company’s net assets need to be equal to or greater than the value of the car to qualify for the lease. This caught me off guard, as the car’s lease price is around £25k for two years, and I have sufficient funds in my bank account, but my net assets are currently under £5k, primarily represented by two MacBooks. Consequently, I was unable to proceed with leasing a car valued at approximately £85k.
I’m looking for effective strategies to enhance my company’s asset base so that the next time I attempt to apply for a lease, I won’t face a rejection.
Any insights or suggestions would be greatly appreciated!
Best,
[Your Name]
P.S. I can’t seem to fix the typo in the title! 🥲
2 Comments
Hey there!
It sounds like you’re doing well with your consulting business, and it’s great that you’re considering ways to improve your company’s net assets. Here are some suggestions to help increase your company’s net assets:
Invest in Equipment and Technology: Besides leasing the car, consider purchasing additional equipment or software that could benefit your business. For example, higher-end computers, software licenses, or any tech tools that can enhance your service delivery could increase your asset base.
Create or Acquire Business Assets: If you provide services that can be packaged or digitized (like online courses, e-books, or software), those can be listed as intangible assets. You could also consider acquiring assets like domain names or trademarks that might add value.
Build Cash Reserves: Since you mentioned having money in the bank, consider retaining more profits in the company rather than drawing them out. This will increase your cash assets, making it easier for you to meet leasing requirements in the future.
Consider a Business Line of Credit: Establishing a line of credit can show that your company has access to additional capital, which might help increase perceived assets, even if you don’t use it immediately.
Get Professional Advice: Consider consulting with a financial advisor or accountant. They can help optimize your balance sheet and provide strategies tailored to your business that you might not have considered.
Reevaluate Your Financials: Ensure that your financial statements accurately reflect all company assets. Sometimes, a reevaluation of what constitutes an asset can reveal additional values you might have overlooked.
Making these changes could improve your net assets and potentially open up more opportunities for financing in the future. Good luck with your business and your car lease!
Cheers!
Hi [Your Name],
Thank you for sharing your experience and the challenges you’re facing with your limited company’s net assets. It’s quite common for small businesses to encounter these hurdles, especially when trying to leverage financing options for things like leasing a vehicle.
One effective strategy to boost your net assets could involve considering the acquisition of more permanent business essential assets that can contribute to your company’s valuation. For instance, investing in specialized equipment or technology that is crucial for your consulting services could justify higher net assets while also enhancing your service delivery. This directly improves both your balance sheet and your operational capability.
Additionally, you might want to look into more formalized cash flow management or project-based accounting. By documenting and forecasting project revenues accurately, you can demonstrate your company’s potential to lenders, which might make it easier to negotiate lease agreements without solely relying on net asset values.
Furthermore, if you’re currently dealing with high cash reserves, it might make sense to consider reinvesting those funds into productive assets or even exploring business development opportunities that could yield greater long-term returns. This could include hiring additional talent or expanding service offerings that help increase revenues.
Lastly, consulting with a financial advisor who specializes in small businesses can provide personalized insights and strategies to enhance your company’s net assets and overall financial health. They can help identify tax-efficient strategies that you might not have considered, which could free up more funds for investment in assets.
Good luck with your business, and I hope these suggestions help you achieve your goals!
Best,
[Your Commenter Name