The end of the financial year represents a golden opportunity for businesses to show they are great prospects for investors’ money.
In the run up to Christmas, next March may feel like a long way off but if you are considering selling equity to fund growth in your business, you need to have your plans in place NOW.
March is the month in which VCs seek to invest any money they haven’t previously used in the financial year.
In the world of equity investment, there is a balance of power: the investors have the money, the business owners have the potential. Both sides need each other, and as the new year approaches, investors will feel they are up against the clock to use their money. It’s a situation that gives more advantage to the business owners who make a strong case for their business being a great investment vehicle.
What do you need to have in place by March?
SEIS / EIS
One of the most important things for investors to know is that their investment will qualify for the tax relief given by the government under EIS and SEIS. These make it attractive for investors to using their capital to grow businesses as they get tax relief both on what they invest and on what they receive as a result of their investment.
You can find our Finance Finder provider Swoop’s guides to the schemes here:
If investors will have a strong preference for businesses that qualify under EIS / SEIS, what can businesses do to ensure they appeal to them?
Advanced Assurance is a government scheme that guarantees a business will qualify under one of the schemes. Advanced Assurance is therefore something investors will be looking out for.
This is why you need to think about this NOW: HMRC is currently taking around eight weeks to process Advanced Assurance applications. This can be fast tracked, but it is still better to act earlier rather than later to get this in place.
If you are not currently thinking about equity finance, you may wish to think again. With rising costs and market volatility, there may be fewer lenders willing to extend credit, loans may get more expensive and borrowing may come at a higher risk. By selling equity, you not only get the funding our business needs to grow, you will also be getting access to knowledge and networks as your investors have a strong interest in seeing your business succeed.
With the expansion of criteria for EIS and SEIS, it’s clear that the government is encouraging this kind of investment.
The opportunities for great businesses to win investment peak in March. Make sure your business is ready.
Register for your chamber Finance Finder to explore your options for equity financing here.