Raising equity finance in the UK in 2018
We know that in the current economic climate, raising finance for any business is not easy, especially when seeking finance from banks. The situation is even more difficult for start-ups and early stage growth companies who have yet to prove their new business ventures to the sceptical business world. A particular problem in European countries is that banks and other finance providers require security, such as personal assets or personal guarantees before debt finance will be provided. In many situations this is not possible because many founders and small business owners simply cannot provide such security. Trying to raise equity funding for start-up ventures is not easy either, as there is a general lack of enthusiasm in buying equity stakes in start-ups and early stage companies due to the high levels of risk attached to such companies.
The British Attitude to Raising Equity Finance
The attitude in the UK towards investment in start-ups and early stage companies tends to be less risk adverse than in many other countries, especially with equity-based investments. UK investors generally have a greater willingness to take on a higher level of risk in early stage companies with high growth prospects, based on the anticipation that the financial rewards from their investment will ultimately be far greater than the initial financial risk taken. To help foster such an attitude, the UK Government has developed a number of Government schemes to encourage investment in start-ups and early stage growth businesses such as by offering highly attractive tax incentives to UK investors. For example, UK investors who invest in a start-up venture that qualifies under the UK Government’s “Start-up Enterprise Investment Scheme (“SEIS”), will not pay tax on any capital gains when the company is sold and effectively receive 50% of their initial investment back. Furthermore, should an SEIS qualified start-up venture fail, the British investor can claim back a large part of their initial investment from HM Revenue & Customs (“HMRC”). The Enterprise Investment Scheme (“EIS”) is similar, but less generous as the scheme is aimed at those companies that are deemed to be less risky than start-ups.
Raising Equity Finance post BREXIT
Despite the fact that the British people decided in June 2016 to leave the European Union (“EU”), we do not regard this fact will make any material difference to raising equity finance in the UK by foreign entrepreneurs in the long term. If anything, we believe the UK will become an even more attractive country in which to both invest and to set up business. Although rumours that the UK will become a potential tax haven with super-low taxes are, in our opinion, overrated, we nevertheless believe the British government will develop policies to make entrepreneurship and investment in the UK to be even more attractive. We strongly believe the UK will be one remain one of the most attractive places in which to do business in the developed world.
Raising Equity Finance with Finovium
At Finovium, we may be able to help if you are considering raising equity capital finance from London. If your business meets with our criteria, we may be able to assist your company. We do not provide finance ourselves, but we can help you by undertaking numerous activities to ensure your venture is introduced to many prospective investors such as VCs, high net worth individuals and SEIS/EIS funds.
Our equity finance services are aimed specifically at start-ups and early stage companies (less than 2 years old) which are either UK domiciled or are German based that operate in specific industries only, and qualify under the UK’s “Enterprise Investment Scheme” (“EIS”) or “SEIS” initiatives.
Please contact us so we can determine whether we can assist your business.