There are still business angels
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by
Desmond High, director of EMC Management Consultancies,
Maidstone
Last month I suggested that the hurdles to bank borrowing
are significantly higher than they have been and it is well
documented that banks are not lending as much as they say they
would like.
The main reasons seem to be a residual lack of trust (I've
spoken to many business people who are determined not to be
borrowers again after bad experiences), the wider margins that SMEs
in particular are being asked to pay and general nervousness about
a big investment commitment.
In the 2011 budget, the Chancellor quietly increased the
incentives for individuals ('business angels') to make investments
in small private companies.
The Enterprise Investment Scheme has been around in different
forms and under different labels since the early 1980s.
In short, this provides assorted tax reliefs for minority
shareholdings in private companies - a cocktail of tax-free capital
gains and income tax deductions in the year of investment. With the
budget changes, if the investment fails a 50 per cent taxpayer
would be able to claim tax reliefs amounting to a 65 per cent
safety net.
In the UK, there is an assumption that banks are the prime
source of risk capital to early stage businesses. In the SME world
the banks have never done risk and will always want security.
At the same time we haven't really developed a business angel
culture and business people who have made money tend to pile it
into property rather than into other ventures.
And anyone who has ever been involved in business angel
investing knows that it isn't without its challenges.
That said, Kent has many high net worth individuals. Wouldn't it
be good to see an increasing proportion of that wealth being used
to help fuel growth in small businesses?
My organisation is a member of the Kent Corporate Finance
Alliance, a who's who of our major law, accounting and corporate
finance firms. The client base covers a great many of those high
net worth individuals.
So if you are an ambitious business and in need of cash to fund
genuine growth, talk to the professionals in the county, tell them
that you want business angel capital and challenge them to use
their network of clients and contacts to help you find it!
Thursday, July 28 2011
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