Tier 1 E does repaid director's loan count as investment?

[txp_london]

Hi there,

I'm switching from T1 GE into T1 E, so £50k in my case and investments made within last 24 months all count. My initial share capital was £7500, and I just injected another £23k for new shares so roughly £30k as share capital. Also I've put another £24k into the director's loan account via through out last 2 years but a large part of it has been repaid with no obvious repayment schedules.

The business is currently in a loss. It has generated £24k sales, and spent over £36k, including £9k of my own remuneration.

To sum up:
total cash into the business:
£7.5k initial capital, £24k director's loan, £23k new share capital, £24k sales = £78.5k over the two years;

total spendings:
£19k direct costs of sales + £17k administrative costs (including £9k director remuneration) + £18k loan repayments = £54k;

I am wondering which of these funds count as "available", "invested" or "spent". Many thanks!


Also, I've got an angel investor who's willing to put £50k into the business however the round isn't closed yet. But he's happy to issue the third party declaration + bank letter + law representative letter. Would this be helpful? Thank you!

[businessmen aces]

Last 24 months only 24 K sales what about staff salaries ? even if you pay minimum wage you need to spend 3120 hours @ £ 7.2 = £ 22464 on wages plus holiday pay etc. Director salary is reduced from investment if business is not making profit

I feel HO may view your business very small and may call you for interview for genuine entreprenuer text.

[sm12]

^^TM's sales could be low due to the nature of the business, as certain businesses take a while to establish/start generating revenue.

TXP, 18K have been repaid out of the 24K, so the director's loan stands at 6K?
I am not sure, but HO might raise questions about this.

When will the round relating to raising funds from the angel investor come to an end? Will you know for sure whether he can invest before you apply?

[txp_london]

Hi guys, thanks very much for the replies.

It's a tech startup and I had little operating in the first year. It surly will need some time before taking off.

I didn't have full-time employees only contractor occasionally. If I'm called for genuine entrepreneur test I'll be very confident to do so as the startup concept is truly running and has been recognised by multiple medias and competitions. We were also selected into a London-based startup accelerator.

My question here really is how should I prepare the investment evidences? The angel round is confirmed but is not possible to be closed before my application which is pretty soon. Only thing I can get from the investor is the third party declaration plus necessary bank and solicitor letters. I was hoping that my own investment could do, as even after deducted my own remuneration & repaid loans the business has already spent out over £50k.

Thanks!

[sm12]

Raising funds from an angel investor is fine but there should be a degree of certainty that he/she will invest in your business.
You can meet the requirements of the route by providing the letters, etc, but then if you don't receive funds from the investor, will you invest your own funds?

[txp_london]

Raising funds from an angel investor is fine but there should be a degree of certainty that he/she will invest in your business.
You can meet the requirements of the route by providing the letters, etc, but then if you don't receive funds from the investor, will you invest your own funds?

Hi sm12, we've signed the term sheet just awaiting definitive agreements to be done so I think it's a deal now. I'm thinking of submitting a copy of our term sheet as well, thought this could help explain the relationship?

According to the policy guide, £50k fund of Tier 1 Graduate Entrepreneur can be from any source. Does it include any revenues generated by the business?

[sm12]

If it's a done deal and just some paperwork is required, then you should be able to use it.

Revenue cannot be taken as investment. But if you have drawn a salary but later put it back into the business, I.e transfer from personal to business account, then you can show that as the investment of your own funds. Can you show 50K of your own funds this way?

[txp_london]

thanks!

been to HSBC today but they seem not sure about the financial institution letter, i only got a standard letter certificate that the investor has the money. they took a copy of the template given by the HO and asked to visit their branch again tomorrow.

will it help if the investor can just transfer me say £30k and I put it into the business as share capital? (we can sort out the investment terms after the visa application, he has the trust on me)

i need to send out the application the day after tomorrow to be on-time, otherwise i need to provide an reasonable excuse.

[sm12]

thanks!

been to HSBC today but they seem not sure about the financial institution letter, i only got a standard letter certificate that the investor has the money. they took a copy of the template given by the HO and asked to visit their branch again tomorrow.

will it help if the investor can just transfer me say £30k and I put it into the business as share capital? (we can sort out the investment terms after the visa application, he has the trust on me)

i need to send out the application the day after tomorrow to be on-time, otherwise i need to provide an reasonable excuse.

If the investor transfers funds, you will still need to provide third party documents, because you would have held funds in your personal account for less than 90 days.

Access to funds
Applicants can only be considered to have access to funds if:
• they provide the specified documents to show cash money to the amount
required (this must not be in the form of assets and, where multiple documents
are provided, they must show the total amount required is available on the
same date)
• the specified documents are provided to show that they have permission to use
the money to invest in a business in the UK
and they have either:
• held the money for a consecutive 90 day period of time, ending no earlier than
31 days before the date of application
• held the money for less than a consecutive 90 day period of time, ending no
earlier than 31 days before the date of application, and they provide the
following specified evidence:
o a bank statement or bank letter to demonstrate funding is available to you at
the time of their application
o the additional specified documents for third party funding
o a letter from one or more UK Seed Funding Competitions or one or more UK
Government Departments, or Devolved Government Departments in
Scotland, Wales or Northern Ireland as evidence of the source of those
funds

[txp_london]

thanks!

Can I just borrow £30k from my investor and hold it in my bank, plus a letter from him confirming he's willing to invest in me?

[sm12]

You will require:
A recent personal bank statement showing the 30K that you receive in your account
Declaration from the third party
A letter from a legal representative, confirming the validity of signatures on each third-party declaration.

I strongly suggest that you read page 87 and pages 91 to 93 of the caseworkers' guidance:

https://www.gov.uk/government/uploads/s ... ur-v18.pdf

[txp_london]

Yes I'm aware of that, thanks!

Or otherwise, as my accountant suggests, once I've received the fund I can transfer it to the business account and make it a director's loan. Will this be better and less hassle?


Thank you so much!

[sm12]

Yeah, much easier to show as invested!

[txp_london]

thank you so much, that's very helpful!

Only concern is that this transfer stays at my account very shortly before getting into the business account. Does that look not good to HO? I hope as long as there're correct loan agreement it should be fine?

Thank you

[sm12]

If you transfer to your business account, it should be fine.
Just make sure you have a proper loan agreement, business bank statements showing the transactions in your name clearly, and business accounts will be needed to show investment. Your accountant could prepare management accounts to show investment.
For the share capital, too, you need to send accounts showing how much you've invested in shares.