CALL FOR THE CHANCELLOR TO ENCOURAGE INVESTMENT INTO GROWTH BUSINESSES
BusinessAgent.com, the FCA regulated business responsible for aggregating and coordinating opportunities for investors from a variety of equity crowdfunding websites, is lobbying the Chancellor to improve incentives for crowd investors in his forthcoming Autumn Statement.
Referring to the Altfi report published on 19 November, Sacha Bright, CEO of Business Agent said, ‘The Altfi report clearly sets out the growing importance of equity crowdfunding and draws attention to the vast increase in levels of return for those investors that benefit from EIS and SEIS tax breaks. The average return post SEIS and EIS at 33.79% is a real attraction for those investors both with the resources to back early stage growth businesses, and the experience to help them succeed. Without the tax incentives, a return of just 2.17% may not be sufficient to encourage investors to take the risk.
Crowdfunding remains high risk where an investor can lose all capital invested. Diversifying your portfolio and taking independent professional advice can help mitigate the risk to some extent but the EIS and SEIS schemes play a vital part in making these opportunities attractive both through return and reducing the amount of capital at risk for those that qualify on an investment.”
With the rapid growth of the sector, Business Agent is concerned that demand for investment will outstrip supply if the thresholds of amounts that individuals can invest are not raised.
“The financial crisis with the consequent low interest rates, and the reduced support from banks in the SME sector has fuelled the growth of the equity crowdfunding market. We are on the verge of creating an AIM for small businesses with potential, and to see this opportunity lost due to those with the investment appetite being constrained through tax break limits would be a real shame,” maintains Bright.
Business Agent is encouraging the Chancellor to link annual increases in the maximum any individual can invest under tax advantageous investments through EIS and SEIS, to the growth of the equity crowdfunding demand, rather than to a very low RPI index, or even to no increase at all.
There are now 14 equity crowdfunders on the Business Agent platform alongside a further 25 other alternative platform sites. “More and more businesses are looking to the crowd for backing, and more and more investors in the crowd are happy to take increased risk reward decisions rather than see their money sitting in the bank, with virtually no return,” says Bright “Its right that the government should recognise this and welcome it, which we very much hope they will do through the Autumn Statement.”