Entrepreneurs looking to finance their ideas and set up a new business can check out their funding options in a new guide.
Published by the government-backed British Business Bank and Institute of Chartered Accountants for England and Wales (ICAEW), the guide walks entrepreneurs step-by-step through their options from start-up to listing on the stock exchange.
The guide is packed with information and tools for entrepreneurs to consider the best finance package for their business at different stages of growth.
One of the key takeaways is that traditional business funding is going through changes as banks pull back from the market and new players move into to take their place.
ICAEW chief executive Michael Izza, said: “Business investment is growing – with an increase for 8.2% forecast for this year, up from a previous prediction of 7.1%. Confidence in the economy is at a record high.
Crowdfunding
“Nevertheless many companies still cannot source finance and have no up-to-date place to look for their best options. This guide is aimed at broadening their horizons and explaining the options step-by-step depending where the business is on the growth cycle.”
These include crowdfunding platforms online and tax breaks from HM Revenue & Customs (HMRC).
Crowdfunding is an expanding phenomenon that started in the States a few years ago, but has spread across the Atlantic to take firm roots in Britain and beyond.
Crowdfunding is a funding option that gives a large pool of small investors the chance to put money into an idea – but the returns for many serious investors are poor as few firms offer an equity stake and provide ‘rewards’ rather than yields.
SEIS explained
A leading source of start-up finance for more serious investors and entrepreneurs is the Seed Enterprise Investment Scheme (SEIS).
For entrepreneurs the attraction is no debt funding is involved, removing the problem of financing capital and interest payments out of tight cash flows and taking away the issue of director guarantees and security in return for cash.
SEIS is a straight cash-for-equity arrangement and often comes with an experienced investor who can add business and financial skills to an idea on the drawing-board.
The entrepreneur can raise up to £100,000 of investment, while the investor gains some serious tax breaks – like a 50% income tax reduction based on the value of the investment and a 50% capital gains tax exemption on the sale of other assets to raise cash for the SEIS.
