John Cheney

John Cheney, CEO and founder of Workbooks.com, discusses how to utilise the Enterprise Investment Scheme to give your SME a boost when the banks won’t.

These are tough times economically and while banks are refusing to lend, SMEs are looking elsewhere to secure the funding they desperately need.

A great way for entrepreneurs to obtain the investment they need is through the Enterprise Investment Scheme (EIS) which allows investors to write off the investment and enjoy tax-free capital gains on the investment. With more good news, since April 2011, EIS tax relief has risen from 20 to 30 per cent, adding even more incentive to investors considering funding small and medium sized businesses in the UK.

Many entrepreneurs just don’t know where to start when attempting to secure investment for their businesses, but finding initial investors can be the hardest part. While the EIS can be helpful, it needs a solid financial plan coupled with the promise of a solid return. Once an SME has had its first round of investment, introductions by other acquaintances and or associates like the company’s accountants and lawyers can provide the networking needed to gain more investors. People feel much more comfortable to give you their money if other investors are already on board.

Once you have met the right people and gained their interest, craft a great pitch. Pretend you have 10 minutes to get their attention; be clear and crisp. The pitch should clearly define the financial plan, potential returns and key characteristics of the business. Be prepared for feedback and be ready with truthful answers that will help the investors tick the boxes they need.

Another aspect of fundraising that can be overlooked is the importance of relying on your team and surrounding yourself with other seasoned business professionals. This relates back to networking, but if investors can sense your dedication and the reliability of your colleagues, then the chance of them investing grows exponentially.

The EIS tax relief can be priceless to an up-and-coming business. The scheme is creating an easier path for SMEs to secure funding, while other factors, like the economy, are hindering growth. Be confident in your company and product, be aware of the benefits of the EIS tax relief, but also have a financial plan that entices the investors anyway.