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Seed investment the way forward
5:00pm Thursday 19th September 2013 in Somerset
BANK lending to businesses in the West Country has decreased by £261m between 2011-12, according to recent figures released by the British Bankers’ Association.
Chartered accountant Robert Stone, from Ilminster, believes that tighter lending requirements and a perception by small businesses that banks are harder to deal with could account for this downward trend.
However, he recommends that new enterprises should not get hung up on the banks, but instead should consider the Seed Enterprise Investment Scheme.
Mr Stone said: “It is hard for start-up businesses to raise finance as the banks will ask them for both evidence of experience as well as assets, which is more applicable to well established companies.
“Whereas equity funding, which is what SEIS is all about, is actually designed to help existing small businesses and new enterprises source finance."
Introduced in April 2012, SEIS is designed to boost economic growth in the UK by encouraging investment in small and early-stage businesses, while at the same time providing incentive to entrepreneurs.
It offers excellent income tax and capital gains tax relief to investors who subscribe in cash for qualifying shares in a qualifying company.
There is a comprehensive list of qualifying criteria for both companies looking for investment and investors themselves and it is important that professional advice is sought by businesses thinking of applying for funding through SEIS, as well as by investors.
- Who is eligible for funding through SEIS?
- Approved start-ups can receive funding of up to £150,000.
- It must be a UK company with a permanent UK base.
- The company must be new - under two years old.
- The business must be small with fewer than 25 full time (or equivalent) employees.
- SEIS funding will not be given to businesses that are not financially healthy.
- The company must have gross assets of less than £200,000.
- The company must not have previously received investments under the EIS or VCT schemes.
- Any funds raised under SEIS must be used in an approved business activity within three years of investment - relief cannot be claimed by investors until a minimum of 70 per cent of the money has been spent.
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