Record number of small businesses applying for EIS finance

Thousands of small firms applying to tax efficient scheme created to encourage private investment into small businesses

Record numbers of small and medium-sized businesses raised finance through the government-backed Enterprise Investment Scheme (EIS) in 2014 to 2015, according to latest data from Radius Equity.

HMRC received 2,925 applications for EIS over the period; an increase of 7% from 2,730 in 2013 to 2014 and twice that of the figure that applied across 2010 to 2011.

EIS aims to encourage private investment into unquoted companies by offering investors generous tax breaks provided by the government, to mitigate the risks of investing in smaller companies.

In 2012 the government sought to improve the balance of risk and reward by extending the EIS to a larger, more stable class of investee companies. There have been 8,000 applications to HMRC since the annual fundraising limit for businesses was increased to £5m.

In 2013 to 2014, small businesses raised a total of £1.39bn through EIS – up 36% from £1.02bn in 2012 to 2013.

Increased interest in the scheme is thought to be partly-fuelled by the continuing difficulty of accessing traditional finance.

Gary Robins, director at Radius Equity, commented: “EIS continues to offer a vital opportunity to small businesses, many of whom are still suffering from the drought of bank lending, to get the funds needed to increase investment and grow.

“With small businessess now seeking clearance in their thousands, there is more choice for investors than ever before. Small businesses from a wide range of sectors view the EIS as the most effective means of fulfilling their economic potential.

“It is now an important component in the funding of growth companies.”

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