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October 24, 2014

Surge in start-ups looking for seed investment

Surge in start-ups looking for seed investmentThere has been a surge in the number of start-ups applying for private funding using SEIS – the government-backed tax efficient investment scheme.

The Seed Enterprise Investment Scheme (SEIS) was introduced by the government in 2012 to stimulate investment in start-ups and early stage businesses by offering favourable tax breaks to private investors. These include 50% income tax relief on investments of up to £100,000 per year.

Now, the numbers applying for SEIS in 2013/14 (to 5 April) are up 73% on the previous year – from 1,644 to 2,852 applications.

Stephen Norton, director at Radius Equity, said: “The introduction of the SEIS provided a new option to start-ups looking to finance their growth plans that was not available before. Start-ups and early stage businesses have found it very difficult to borrow from the banks since the financial crisis because the banks have been under significant pressure from the regulators to rebuild their balance sheets.”

The scheme provides “a real boost to the economy” said Norton. “The fantastic tax breaks the government has put in place are attracting huge numbers of start-ups and investors.”

The government also offers the Enterprise Investment Scheme (EIS) – aimed at slightly larger businesses and popular with SMEs looking to fund the next stage of their growth. Those applying for SEIS are typically start-ups.

The EIS was expanded in 2012, increasing the annual fundraising limit for businesses to £5 million and opening up the scheme to a wider pool of businesses.

“The introduction of SEIS and the expansion of EIS in 2012 means that the full spectrum of small business from start-ups right through to stable, larger SMEs can access enterprise finance from private investors,” said Stephen Norton. “Investors are also benefiting from a wide choice of businesses to invest in, with tax incentives to match the level of risk they are willing to take on.”

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