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Find the right funding

13th June 2017

Find the right funding

One of the worries we hear most often from our clients is how to find the right funding for the next stage of growth. Traditional funding methods have been enhanced by a range of other options, giving you greater choice and more flexibility. Here, we set out the pros and cons of the funding methods we encounter most often.

Funding: High street banks and building societies.

  • Amounts: From a few thousand pounds upwards.
  • How it works: You apply for a loan and the bank will decide whether to lend the money to you.
  • Pros: Tried and tested method with (usually) very transparent terms and conditions.
  • Cons: Loans are currently harder to secure.
  • Tax incentives: No. Just a straightforward loan process.

Funding: Business Angels

  • Amounts: Various depending on the project but usually below 500,000.
  • How it works: You offer shares in your company in return for investment.
  • Pros: You could find an Angel with expertise in your industry. Angels are likely to be much more ‘hands-on’.
  • Cons: You may end up giving a significant share of your business to an Angel. This can cause issues with control and strategy.
  • Tax incentives: Possible qualification for EIS, Seed EIS and Entrepreneurs relief.

Funding: Grants

  • Amounts: Various depending on type of project.
  • How it works: Government bodies, charity groups and industry bodies offer a range of grants, usually focused around innovation, energy saving and job creation.
  • Pros: Possible to obtain resources or funding at no cost.
  • Cons: Hard to find; application process can be complex and confusing.
  • Tax incentives: Varies depending on type of grant.

Funding: Venture Capital Trusts (VCT)

  • Amounts: 200,000 per annum qualifies for tax relief.
  • How it works: Invest indirectly in a range of small higher risk companies whose shares and securities are not listed on a recognised stock exchange.
  • Pros: VCTs are actively looking for companies to invest in.
  • Cons: Must be approved by HMRC, with various conditions that must be met.
  • Tax incentives: Yes. No tax on dividends from VCTs; income tax relief of 30% of amount invested; Capital gains relief.

Funding: Crowd funding and peer-to-peer lending

  • Amounts: From £5,000 to £250,000 but can be for more.
  • How it works: Individuals or companies put in funds in return for a share of equity in your business.
  • Pros: Removes the risk of having one main investor. Investors may become advocates and supporters of the business.
  • Cons: Increased admin because there are more investors.
  • Tax incentives: Projects may qualify for EIS or Seed EIS schemes and Entrepreneurs relief.

Funding: Employee share schemes

  • Amounts: Usually £5,000 - £50,000.
  • How it works: Offer employees the option to purchase shares in the business.
  • Pros: Improves employee retention; low cost; keeps investors in-house.
  • Cons: Need approval from HMRC, and can be complex, with tax implications.
  • Tax incentives: Varies depending on scheme.

Download the PDF

We advise that you speak with Wise & Co before looking at funding options. Please call us on 01252 711244.

CLIENTS WORDS

The expertise and support of Keely Harvey and Bob Lock is a major factor in our operational and financial success. Wise & Co are most professional and personable, and we would strongly recommend them.
International business consultancy client

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