Partner Article

Private investment key to SME growth

Businesses across the region who have previously struggled to fund funding are being encouraged to look towards a private investment scheme to help them grow.

The Seed Enterprise Investment Scheme, which is included in the Government’s draft Finance Bill 2012 will make it make it more attractive for business angels and investors in support start-ups and SMEs.

the new scheme will provide income tax relief of 50% to individuals who invest up to £100,000 in qualifying companies, and in the first year there will also be a capital gains tax relief. This would offer a potential tax relief of up to 78%, which should prove very attractive to investors.

Stephen Hall, tax partner at Deloitte in the North East said: “Since the credit crunch we’ve seen more business angels coming forward and providing finance to companies who haven’t been able to get funding through traditional routes.

“A lot of successful entrepreneurs are happy to invest, they’ve taken risks in the past to get to where they are today, and they’re happy to do so again for the right opportunity.”

The scheme will be available from 6 April 2012, and will run alongside the existing Enterprise Investment Scheme. It is hoped that the plans will accelerate business investment, and address the funding gap for smaller businesses which could create further opportunities for North East entrepreneurs to find finance.

Stephen is now encouraging start-ups to be bold when coming forward for investment, as they are more likely to be more successful if they show they have a strong idea.

“With increasing competition for their money, Angels are getting more demanding so it is important for entrepreneurs to show they mean business and demonstrate a professional approach to their pitches.” he continued.

Nonetheless, changes to the Enterprise Investment Scheme which have raised the limit from £2 million to £10 million could make it easier for entrepreneurs to find backing.

Stephen added: “This isn’t going to be suitable for everyone, but for people with a novel business or an interesting idea that will catch the eye of investors, it could tip the balance in their favour.

“In recent years we’ve seen money attracted to scientific businesses, films and media projects through the EIS.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .