The Seed Enterprise Investment Scheme (SEIS) is blossoming as investors doubled the amount of cash ploughed intro start up businesses to almost £165 million last year.
Around 2,000 start ups picked up the cash in the second year of the scheme designed as an alternative funding source to banks for entrepreneurs.
Investments soared from £86 million in 2012-13 to £163.5 million in the last tax year.
On top of that small businesses also received £1.46 billion through the Enterprise Investment Scheme (EIS) – up 41% on the year before and the highest level ever recorded.
The cash went to 2,710 businesses – up 10% from the year before.
The figures come from the latest data issued by HM Revenue & Customs (HMRC), which supervises both schemes.
Boosting the economy
SEIS raised money for 1,695 new businesses in the year, while 300 more received extra funding.
Gary Robins, director at Radius Equity, a leading SEIS and EIS investment firm, explained generous tax breaks offered by HMRC are proving a hit with investors.
“The tax benefits are encouraging entrepreneurs to start more businesses and investors to back them with their cash,” he said.
“Together this is boosting economic growth and jobs.
“The schemes offer investors a wide range of choices for investment and they are accomplishing what many other small business initiatives have failed to do – get money into small business start ups.”
EIS has run for many years, but SEIS was a new initiative introduced by Chancellor George Osborne to help entrepreneurs to get their business off the ground when refused funding by the banks.
Directors want more cash
Both investment schemes have been so successful that the influential Institute of Directors is urging the government to give EIS and SEIS wider publicity to promote the tax breaks so investors pump more money into start up businesses.
Jimmy McLoughlin, deputy director of policy at the IoD, said: “EIS and SEIS have the potential to uncover billions of pounds in alternative finance for business that the banks once offered but are no longer interested in providing.
“More than 100,000 investors used the schemes last year, but there is no reason why thousands more cannot participate.
“Investing in companies should be as easy as putting money into an ISA or pension and the government has a real chance to do this and make a difference to the economy.”