The EIS (Enterprise Investment Scheme) was set up by the UK government in 1994 to encourage wealthier business people to invest in small companies which might otherwise be consider too risky, by providing tax benefits to those who invest.
According to the Government website, EIS was "designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies." EIS featured in George Osborne's 2016 Budget in relation to changes in Capital Gains Tax, changes which will likely see an increase in interest in EIS, which provides a number of financial benefits for the wealthy.
If you own a small business and are seeking Enterprise Investment Scheme support, here's some information to help you get started.
Who benefits from the Enterprise Investment Scheme (EIS)?
Between 2013 and 2014, some £1.6 million was raised by small businesses across the UK whose circumstances fell inside of those outlined by HMRC here.
This represents a huge amount of investment into companies which may otherwise struggle to get off the ground. It's also representative of the opportunity seen by wealthier people, for whom the investment is a great way of gaining tax benefits as well as helping another company to grow.
It's particularly interesting to consider these investments in line with the registered locations of those businesses. The map below shows the level of investment sought by region, and is based on data from HMRC.
As shown by the map above, the majority of the investments requested were from businesses in London. This aligns with London business population density, where the number of businesses in London and the south east combined represents over a third of the UK's total number of businesses (source). In London alone, £700 million was raised.
Meanwhile, the 'northern powerhouse' shows strong investment too in new, riskier businesses, with £58.3 million raised. According to the RBS Growth Tracker, the north west was one of the key areas for business growth in 2014 and has continued to grow since according to data released by the House of Commons Library.
The Midlands was also a strong area for business investment, whilst investment across the UK was predominantly focused in England.
Of course, your business location doesn't have any technical implication on your EIS funding application. However, the EIS and SEIS schemes were set up to make investment more attractive to potential investors and your business location can also affect the way your business is perceived by investors and customers alike.
Consider London as an example. The city had the highest incidence of EIS funding applications of the whole country, aligning with the overall business statistics which tell us London is a hub for new business and business growth. When choosing which business to invest in, investors may be more inclined to select those which are registered in the city.
Equally, customers make assumptions about your business based on your address, too. Consider the difference, for example, between a business registered as a residential address and one registered at a prestigious business address such as London. Your prospective customers or clients may well decide that the more prestigious business address is a sign of trustworthiness or a more established company, so investing in a prestigious London address may be something to consider.
How to apply for EIS funding post Budget
The Budget 2016 announcement will likely see an increase in interest in the Enterprise Investment Scheme and for this reason, it's well worth small businesses who seek such an investment putting in their applications now.
If you do want to apply for EIS funding, there are a number of criteria you need to fulfil in order to be considered. You can read the full guidelines on eligibility on the Government website.
If you want to be considered for investment by individuals who are not already connected with your business, visit the Enterprise Investment Association who will help you apply.
Original Data
Data from published under UK Business News
