What funding options are available for SMEs?

January 10th, 2020     Business news, Improve Your Business, News

More than £21 billion has been invested through the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS), the latest figures have revealed.

The schemes – which incentive investment by offering generous tax reliefs to venture capitalists – are among the most popular forms of finance in the UK.

In today’s blog, we’ll put the EIS and SEIS, along with several other funding options, into focus.


The EIS – launched in 1993 – is an incentivised venture capital programme designed to encourage investment in new and growing businesses. The scheme offers tax reliefs to venture capitalists who buy new shares in a company, providing the business meets strict criteria.

Under the terms of the EIS, a company can raise no more than £5 million each year and no more than £12 million in its lifetime. The company must also receive investment through a venture capital scheme within seven years of its first commercial sale.

Launching in 2012, the SEIS for start-ups built on the success of the EIS. To date, the scheme has helped 12,900 new businesses raise over £1 billion. Only the smallest of businesses can use the SEIS. To find out if you qualify, click here.

After offering generous reliefs for almost three decades, the Government has now confirmed changes to both schemes to prioritise investment in “knowledge-intensive” companies. These are defined as companies carrying out research, development or innovation at the time of issuing new shares.

For more information about the changes, click here. For help and advice securing EIS or SEIS funding, get in touch with our team today.

 Government grants and funding

From Government-backed loans to non-repayable grant funding, the public purse offers a plethora of growth and investment opportunities for small businesses.

The Government Start Up Loan Scheme is among the most popular. Under the scheme, entrepreneurs can apply for loans of £500 to £25,000 to start or grow a business.

For more established businesses, a loan can be found through the British Business Bank (BBB). Since launching, the BBB has helped more than 126,000 growing businesses connect with internal and external finance options.

To find a Government grant or access Government-backed finance, click here. For help and advice securing funding, get in touch with our team today.

Bank loans and alternative lenders

Banks and building societies still provide the lion’s share of business loans in the UK. Bank loans are favourable as they are both flexible in value and terms, and do not away control of your business. Unfortunately, securing a bank loan after the 2008 financial crisis is not as easy as it once was.

If you do get turned down for a bank loan, however, the Bank Referral Scheme (BRS) will put you in touch with an alternative lender. Under this scheme, Britain’s nine biggest banks are required to pass on the details of businesses that have been turned down for loans to online credit brokers Alternative Business Funding, Funding Options and Funding Xchange.

Launched in 2016, the BRS has helped more than 1,700 businesses secure £17 million of funding.

Do note, however, that alternative lenders are likely to charge higher interest rates as a result of providing riskier loans.

Friends and family

Alongside global retailer Amazon and supermarket chain Walmart, the Bank of Mum and Dad has helped hundreds and thousands of businesses get off the ground.

The family and friends loan may be right for your business, but only if you follow the golden rules.

Do write up a contract. Without a legal agreement, even the smallest amount of capital can cause devastating family fallouts. If applicable, include interest rates, the length of loan, repayment terms, securities and penalties for late or non-payment.

Do borrow responsibly. Make sure your family understands the risks involved in lending money, including the possibility of insolvency.

Do be aware of the tax rules. A loan does not attract tax, while a gift does. If you are unsure of the tax position, speak to an advisor.

Don’t lie about your finances. Treat a family loan like any other – be honest if you are struggling with repayments.

For more information about friends and family loans, get in touch with our expert team.


Crowdfunding involves tapping into a pool of investors to raise funds to launch a new product or service. Typically, a business will offer a reward, such as a prototype or a free subscription, in return for a small amount of money. The rewards are usually tiered, however, to incentive more investment.

While not as common, equity crowdfunding and debt, or peer-to-peer, crowdfunding is also available.

Because crowdfunding projects are hosted on popular websites such as Seedrs and Crowdcube, businesses do not have to spend a lot of capital on PR and marketing – although a loyal following will boost chances of success.

According to the latest statistics, the number of UK crowdfunding platforms has risen from just 12 in 2010 to 65 in 2019, raising a total of £4.5 billion across 889 deals.

To learn more about alternative funding methods such as crowdfunding, get in touch with our expert team.

Personal investment or loan

Most businesses start as a small seedling and do not require a huge amount of capital to grow. In these scenarios, a personal investment or loan may be most appropriate. Understand, however, that if you default on a loan under your name, you will be personally liable for the debt, rather than the company.

We work with business owners to build the businesses they need to have the life they want, so if you want to talk about how to grow business, get in touch with me on 01803 296678 or email andrew.price@andrewprice.co.uk