Raising The Stakes
...Knowledge Is Power
Tax efficiency in investment is simultaneously one of the most important and least sexy-sounding things to consider when raising funding for your business, and it can offer a key means of attracting investors. You've got some options here, which we're always happy to talk over with you, but let's get the ball rolling with these:
The Enterprise Investment Scheme was set up by the government to offer tax reliefs to investors buying shares in smaller businesses. There are a few conditions to be met by both the investor and the company (which, for example, must be unquoted and have gross assets below £15 million), but it's possible to raise up to £10 million in any 12-month period under the scheme.
The Seed EIS is a similar scheme aimed specifically at encouraging investment in small start-ups, which tend to be seen as more risky propositions. The reliefs it offers are more generous, but the qualifying criteria are stricter. If you've been in business for under two years and have 25 or fewer employees, you're well on your way to qualifying and can raise up to £150,000 this way.
While it might sound like something you'd have to pay a little extra for in Soho, Entrepreneurs' Relief can actually make investment in your business a much more attractive prospect. Basically, if the company and investor qualify, ER can offer a lower Capital Gains Tax rate when the investor sells any part of their share of the business. There are some criteria to meet, but ER can do a lot to reduce the sense of risk involved.
There are other possibilities as well, such as Venture Capital Trusts and Employee Ownership schemes, so talk to RIFT Accounting and we'll walk you through the best ways to draw investors to your business.
Knowledge is power, and the more good information you can get your hands on, the better your chances of success. The trick, of course, is knowing good advice when you see it, and sifting out what's useful and relevant. Other people's success stories may tell you only that they were in the right place at the right time. Sometimes, you learn more from the people who tried, failed, and understand why.
Joining a business accelerator or incubator often offers a great launch pad for a start-up. Often housed in Innovation Centres in universities, they provide the opportunity to be immersed in a fertile, creative environment with access to ready-made support networks, mentors and potentially even funding options. Accelerator programs can slot you into the fast lane with funding, expertise and office space, in return for a stake in your business. Their goal is to kick-start your growth over six to nine months, to the point where you're ready to raise serious investment.
The public sector is increasingly offering Enterprise Partnerships, practical assistance and other resources to help people into work and to reinvigorate communities. You may be able to get free access to workshops, expert advice and networking events, or more concrete resources like workspaces and free Wi-Fi.
Incidentally, don’t make the mistake of automatically thinking of large firms as necessarily the enemy. Many of them provide entrepreneur programmes to encourage innovation. Entry is often in the form of "Dragon’s Den" pitch competitions, in which you can win guidance from experienced entrepreneurs and invaluable strategic support - along with some much-needed visibility and networking opportunities. Seed funds and so-called "angel investors" tend to keep their eyes on these programmes, so taking part may mean you get noticed even if you didn't "win".
RIFT Accounting has the fast track on all the best ways to raise money for your business. Whether you're hunting for buried treasure in the EIS or going toe-to-claw with the dragons themselves, get in touch and we'll help you turn your once-upon-a-time into a happily-ever-after.