If you have a Limited Company you may be able to raise some capital through selling a proportion of the shares in your Company to an investor. Commonly, private investors are known as Business Angels. Some of those who go through the process of trying to find a Business Angel to invest in their business, think this a bit of a misnomer! (Try and watch Dragons Den on BBC television!). Venture Capital companies also invest by buying equity in small and medium sized enterprises but typically invest much larger sums of money (into the £ millions).

The advantage of getting an individual to invest in your business is that you might also be able to secure skills, experience and contacts that you wouldn’t have otherwise. The disadvantage is that only a proportion of the business would belong to you instead of all of it. However, if you think your business has great potential, it might realise that potential much sooner with the right person on board and sufficient capital.

If you know any individuals yourself who have expressed an interest in investing, then there is an attractive investment scheme for them to be able to do this in a very tax efficient manner. Its called the enterprise Investment Scheme (EIS). Both the business and the investor need to be eligible to qualify for the scheme. Its worth talking to your Accountant about this and there is detailed guidance on Her Majesty’s Revenue and Customs website.
www.hmrc.gov.uk

If you would like to know more about finding a Business Angel then you should look on the website of the British Business Angels Association. However, for those of you looking to start brand new businesses – a word of warning. In my experience few (if any) Business Angels (BAs) want to invest in new businesses. The risk is often considered too big. BAs do invest in very young businesses which have already proven that there is high and growing demand for their products and / or services in the marketplace. They like to invest to implement well thought out growth plans. So if you are a new start up don’t pin your hopes on securing BA finance straight away.
www.bbaa.org.uk

If you run an existing business with great potential and are looking for a significant amount of funding then Venture Capital might be the route for you. There are some regional venture capital funds in existence now which start investing at around £50,000. Your Business Link should know about these. For more information go to: www.bvca.co.uk

Louise Schofield
louise@realworldltd.co.uk
www.realworldltd.co.uk

Other articles in this series:

Doing it Yourself
Gifts and Grants
Business Loans
How banks make lending decisions
Selling Shares
Changing your Plans