Are EIS Schemes The Right Investment For Me?

EIS schemes (Enterprise Investment Schemes) offer investors who buy shares in new, small and high risk companies a variety of tax reliefs to help them raise finance. These can be very useful for small businesses, as they can gain the investment and money needed to help get their business started.

As with all schemes of this nature, there are plenty of positive and negative features associated with EIS’. It is important that you weigh these up before deciding whether the scheme is right for you.

The positives

The main positive for businesses looking for investment using this scheme is that it can help them gain access to money they may not otherwise have access to. This is because EIS schemes are aimed at businesses who may be considered a ‘high risk’ investment, helping them gain the money they need when traditional options may not favour them.

As this is a scheme exclusively aimed at small businesses, those using EIS schemes are likely to attract the right sort of investment too. Your company would be able to raise up to £2 million through these means making an EIS scheme a great option.

Those who invest through an EIS scheme cannot have any financial interest in the companies they invest in – which can be seen as another benefit. This would mean that you would remain in control of your company but could also get input from someone who is impartial towards it. This could help bring fresh ideas and investment into your business, helping to promote growth and success.

The drawbacks

As with all schemes, the EIS programme is not without its drawbacks. These are far outweighed by the positives but are something which every business should be aware of before joining.

The main disadvantage of the scheme is that not all trades are included, so not everyone can apply. It is important you check this beforehand and also give consideration to other limitations imposed by the scheme. These include the fact that the company must employ 50 people or less.

You also need to consider the restrictions which are put in place on the tax reliefs which are offered to eligible members of the scheme. These reliefs are one of the main attractions of the EIS programme so it is important that you understand exactly how they work and whether they apply to your situation or not.

The verdict

Overall, EIS schemes can be seen to be a positive financial decision for small businesses that are looking to attract investors. The scheme is perfect for those with a small business in its early stages of development and is a great way to gain the capital needed to kick-start your business venture.

Naturally, there are a few disadvantages and limitations to the scheme but these are easily outweighed by the benefits. It is highly recommended that anyone considering this option should speak to EIS scheme professionals and experts, such as CSS Partners, who can advise you on whether this is the best course of action for your company.