Entrepreneurs are not doing enough to sniff out sources of finance like the Seed Enterprise Investment Scheme (SEIS), claims new research.
Although the banks have shut the doors on lending money to set up and expand a business, few entrepreneurs have any idea of where else to look for the cash they need.
Only 12% of small businesses managed to secure funding last year, says a study by financial firm Axa Business, and half of the owners had to scrabble around to raise the cash from overdrafts, credit cards, friends and family.
Business funding options
Although traditional credit lines have virtually been cut by the bank, leaving small firms and start-ups adrift, writes Stuart Smith of specialist investment web site SEIS.co.uk, the research confirms few have heard of several alternative funding options offered by the government.
- SEIS provides up to £100,000 in a tax a year to qualifying start-ups and offers investors generous income tax and capital gains tax breaks to sweeten the deal
- Enterprise Investment Scheme (EIS) is for more established businesses looking to expand and also offer investor tax breaks, although not on the scale of SEIS
- Funding for Lending is a government initiative to provide funds for banks to lend to businesses
Besides these three main schemes, money is also available from venture capital trusts and government loans.
Axa Business reckons half of small businesses are looking for cash, and almost two-thirds of them go to the banks, and most of their requests are turned down, said Stuart .
Quest for cash
“Despite an overwhelming quest for money, only 6% of small businesses were in a SEIS or EIS scheme and only 7% had asked for a government loan according to Axa,” Stuart said.
“Although the government has held road shows, online webinars and sent ministers around the country to publicise funding for business, it appears very few entrepreneurs have got the message – and their businesses are suffering because of their lack of knowledge.”
Indeed, the Axa Business survey found only a fifth of small businesses had heard of any of the initiatives and few of them understood how they could help their business or investors.
“This is just not good enough. Just think of the extra jobs and economic growth that could stem from wider use of these government-backed schemes, especially now pension investors have lower caps and need tax efficient investments to make the most of their money,” said Stuart Smith.
Seed Enterprise Investment Scheme Guide
To find out more about the Seed Enterprise Investment Scheme (SEIS) and how to make the most out of it, you can download the SEIS Guide here