What financial support is available to SMES?

You will also be entitled to receive a multitude of business support products that are tailored toward your plan, and will be assigned a delivery partner by the company who will be a specialist charged with formulating a more detailed and complex business model for your company to adopt.

Ultimately, the scheme is aimed at helping young entrepreneurs enter into the business world, and if you believe you have a promising business plan that simply requires the funding to succeed, then considering this route is a definite as it can help you achieve this and provide you with the business nous from an expert that could set you apart from competitors later on down the line.

Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme was created to assist small and newly formed businesses raise equity finance by offering a multitude of tax reliefs to prospective investors who are looking to buy shares in the business. Essentially, if you are looking to acquire the finance to push your business to new heights, but are aware that your plan is relatively high risk, then you should consider the scheme because it can provide that extra encouragement to investor’s to part with their cash and pump it into your business.

The main relief offered through the scheme is on income tax, and any investor who purchases shares in a company that qualifies for the SEIS scheme will be able to receive the entitlement. An investor can make a maximum yearly investment of £100,000, and the total relief on their income tax will be 50% of the value of the shares they purchased via the scheme.

The investor will have to keep the shares for at least 3 years from when the relief is issued in order to retain their benefits, and a claim to relief can be made up to 5 years after the investment was made.

So for example, say Stephen invested £30,000 in the tax year 2011-2012 into SEIS shares. Stephen would be entitled to £15,000 worth of relief (50% of £30,000). If his tax liability for the tax year is £25,000, then he would be able to reduce this by £15,000 due to his investment through the scheme.

Investors will also be enticed by the capital gains tax relief that is granted to all shareholders who retain their stake for the obligatory three year period, meaning that they stand to gain more from their risky investment that they otherwise would have been able to attain. So if you are aware that your business plan is high risk, and have been unable to acquire finance from banks due to this actuality, then it is worth looking into whether you are applicable to place your business onto the scheme, as it could enable you to attract higher levels of funding from investor’s who may have otherwise been apprehensive about placing their money into your company.

Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme is a supplementary government initiative to the Seed Enterprise Scheme and similarly seeks to assist small, high risk businesses attract investors though the allure of tax reliefs. You will have to apply online to gain entry onto the scheme and will then have to present your business plan to a tax officer who will decide whether you are eligible. Your business must also not have assets that total higher than £15 million, and all capital given via the scheme must be invested into the company’s expansion within 2 years of receiving the funding.

Essentially, if your company enters onto the scheme, then any investor is entitled to income tax relief that totals 30% of the value of the shares they bought in your business. The maximum investment allowed through the scheme is £200,000, meaning that an investor stands to make a saving of £60,000 on their tax liability by buying shares in your company. The scheme is often viewed as functioning for encouragement purposes and it is particularly beneficial to high risk businesses that would otherwise have struggled to acquire higher levels of finance. Investor’s will also be attracted to the prospect of not paying any capital gains tax on any gains they make on their stake, providing that they retain it for at least three years.

Alongside the capital gains and income tax reliefs available through the scheme, there are a number of other reliefs that investors stand to obtain by purchasing shares in your company, so if you are struggling to acquire the finance to push your business to the next level, but are convinced you have an attractive model, then looking into this scheme further could be the best move to take in order to realise your ambitions.

Enterprise Finance Guarantee Loan

The Enterprise Financial Guarantee Loan scheme essentially functions to give loan applications made by small and medium sized businesses to banks a greater level of credibility. Under the scheme, the government underwrites 75% of the value of the loan you are applying for, which increases the chances of the bank accepting your application, particularly if you do not have the projections or reserves at present to back up the loan.

If your application is accepted, you will be able to acquire loans that total between £1,000 and £1 million, and the timeframe in which it is paid back can also span between three months and 10 years. Moreover, you can break the finance dates up into regular intervals, or receive it as a one off payment, meaning that it can be utilised in order to uphold a positive cash flow for your business or to pursue more ambitious endeavours. The loan can be utilised to enhance your company’s working capital, reinvigorate its cash flow and a number of other purposes, and the scheme could help you acquire this funding far easier than you would under normal channels.

You will have to pay the lenders standard interest on the loan you acquire, and will also have to pay a quarterly premium to the Department for Business, Innovation and Skills which equates to 2% of the value of the outstanding balance of the loan.

You can find a list of lenders registered on the scheme on the official website, and the government has recently expanded this so that a number of banks are now listed for utilisation.

Businesses in the coal, transport, and agriculture and forestry industry do not qualify for this scheme, nor do any companies with a yearly turnover of more than £41 million. The decision to approve your application is made by the bank, who will utilise criteria from their own industry and then from the scheme before finally deciding whether to give you the funding. You will have to prepare a number of documents when pitching your idea, including projections, management accounts and your business plan, and keep in mind that there will be a higher level of risk assessment undertaken by banking officials than there would be from other government scheme representatives.

However, the increased likelihood of acquiring a bank loan makes the scheme a definite to consider if you are struggling to obtain finance at present to realise your aims, and should be pursued before looking at other forms of short term finance, such as high interest payday loans.

The Business Finance Partnership (BFP)

The Business Finance Partnership scheme is an excellent initiative that has bolstered the lending levels of alternate lenders to banks. Though the scheme itself cannot be utilised by your company, it nevertheless has raised your chances already of acquiring cheap finance from alternate sources to banks, such as from peer-to-peer lenders. The scheme has sought to raise the provision of capital to businesses through alternate lenders to banks.  The government has currently invested £1.2 billion into different sources of finance in a bid to bolster their own lending levels to small and medium sized businesses. This money is then being matched with at least an equivocal sum from private sector investors who place the funding into businesses that apply via the scheme.

There are a number of different peer-to-peer lenders that have benefitted from the scheme, and you could acquire the funding you require by applying for a loan from these forums. In particular, Market Invoice, Funding Circle, Boost & CO, Beechbrook Capital, URICA and Zopa should all be looked at for finance purposes, and you may often find that you’ll get a better rate than you would have done from a bank in the first place.