Private investments in SMEs increase through EIS scheme

SMEs are taking advantage of increased private investments thanks to government scheme, a new study finds.

Small businesses received a record £1.8 billion from private investments through the government EIS scheme in the last year, up 14 per cent from £1.6 billion in the previous 12 months, finds Salisbury House Wealth.

The study reveals that the figure has increased by 76 per cent in just two years – up from £1 billion in 2012/13. The growing use of the scheme marks a positive development for both small businesses looking for funding and private investors.

There is a 39 per cent increase in the number of tech companies receiving private investments through EIS since 2012/13 – with funding for tech companies reaching £349 million in 2014/15, up from £197 million two years ago. Technology companies now receive 19 per cent of the total funds raised through EIS.

EIS offers investors a range of tax reliefs if they purchases new shares in smaller companies looking to raise finance. It is one of the few government-endorsed tax efficient investment vehicles still available to higher earners.

Through EIS, investors get 30 per cent initial income tax relief, investing up to £1 million per annum on companies that qualify for EIS.

Tim Holmes, managing director of Salisbury House, thinks that tax breaks through EIS are among the most generous of all investment products. However, he points out that there are extra risks involved.

Holmes says, ‘As interest in tech start-ups and fintech companies in particular grows across the economy, private investors are increasingly looking for opportunities to capitalise on this growing market.

‘In the UK established tech companies that offer opportunities for investments are few and far between – so many investors look to get in on the ground floor.

‘This increase in private investment via EIS is really good news for SMEs looking for help in expanding – and a positive driving force for the UK’s entrepreneurial culture as a whole.’

Further reading on investing as a small business

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