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SMEs Attracting More Private Funds From EIS Investors

Updated: 23rd May 2016

SMEs Attracting More Private Funds From EIS Investors

The number of investments made into small and medium-sized enterprises (SMEs) around the UK via the government’s Enterprise Investment Scheme (EIS) increased notably last year.

According to the latest figures, there was an 11 per cent increase in the number of EIS investments in the year 2014/15 as compared with the previous 12-month period.

EIS was created by the government as a means of encouraging investments into SMEs by way of various tax breaks and incentives.

Investors who use the EIS structure can back small and medium-sized companies in a way that allows them to recoup profits free of capital gains tax. Investors also receive an initial 30 per cent income tax relief when they allocate funds in support of the activities and development of an SME.

Figures compiled by the private equity investment company Radius Equity suggest that there were 135,445 EIS investments made around the UK in the year 2014/15, which represents an unprecedented level of activity in this context.

The number of businesses that succeeded in attracting funds on the basis of EIS arrangements was found to have risen from 2,820 in 2013/14 to 3,130 last year, which represents around a 10 per cent increase.

“Crowdfunding has helped raise the profile of the scheme for those affluent investors looking for investment opportunities with competitive returns,” explained Gary Robins, Radius Equity director.

“With the traditional forms of lending often closed to small businesses, they are increasingly looking for alternative ways to attract this investment.

“By funding these small businesses through the EIS scheme, allowing them to expand into new markets and create jobs, investors are in turn helping to drive wider economic growth throughout the UK.”

In order to appeal for investments under the terms of the EIS scheme, British SMEs need to have no more than 250 employees and gross assets worth no more than £1.5 million.

The EIS was first established in 2012 and was designed to encourage mutually beneficial funding scenarios that result in investors backing small businesses and start-ups in ways that facilitate their growth and development towards sustainability and profitability.

Emma Jones

About the author

Emma Jones

Director

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Emma qualified as a Chartered Accountant in 2002. Since then, she has specialised in corporate finance, joining BTG-McInnes in July 2006. She has extensive experience in advising the SME market on fundraising, re-financing, acquisitions and disposals, across a broad range of industries.

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