Banks are often reluctant to lend to SMEs, and institutional investors tend to see smaller or early-stage businesses as too risky for the size of investment involved. SEIS and EIS change that calculation for a private investor. Income tax relief gives money back straight away, and further relief is available if the investment doesn't work out, so there's less to lose either way.
That lower risk is what brings a wider pool of investors to the table. Folio Partners manages the process of getting SEIS or EIS status confirmed with HMRC.
The UK government has built a deliberate set of tax reliefs to make it more attractive for individuals to invest in growing businesses, and SEIS and EIS are the two aimed squarely at private investors. Both exist to solve the same problem: making it worthwhile for someone to invest in an early-stage or growing business by reducing what they stand to lose if it doesn't work out. Where they differ is who actually qualifies.
Most companies raising from private investors will find one clearly fits and the other doesn't. Here's how the two compare:
To raise investment under either scheme, a company needs to show HMRC that it qualifies. Most small companies do, a handful of sectors are excluded, mainly banking, finance and property investment. Folio Partners manages that whole process for you, from the initial HMRC application through to keeping everything in place once investors are on board.
