Entrepreneurs don’t understand the EIS and the SEIS

Plenty of research has shown that too many UK-based entrepreneurs and investors are unaware of the Enterprise Investment Scheme (EIS).

The 4.8m small and medium-sized enterprises in the UK are a hugely undervalued sector right now. Fundraising for entrepreneurs is notoriously difficult, least of all given the current economic climate. EIS and the Seed Enterprise Investment Scheme (SEIS) have been designed to help this.

Designed to help smaller companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies, EIS and SEIS should stand as a crucial mechanism to link UK entrepreneurs trying to raise funding with angel investors looking to invest.

Worryingly, recent research by entrepreneur networking group E2Exchange reports that over 25 per cent of entrepreneurs interviewed said that they had never heard of EIS, over 60 per cent had never used EIS to raise funds for their business, and over 90 per cent reported that they had never used SEIS to raise funds for their business or as an investor. 

With 99 per cent of the UK’s companies being in the SME sector, it is astonishing that such a hugely valuable incentive is so poorly understood by both investors and entrepreneurs.

The current EIS and SEIS system, whilst attractive, requires further work. The current funding constraints of SEIS must be raised from £150,000 to £250,000 to enable greater funding capacity for entrepreneurs. Wider sector eligibility is needed to include, for example, asset-backed businesses such as hotels and residential care homes.

Furthermore, greater marketing in general is required in order to make known the benefits of SEIS to both current and potential entrepreneurs.

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