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Innovative technology businesses will still struggle to access funding

The Chancellor’s £500m Future Fund has been designed to support businesses whilst protecting the taxpayer but will leave many innovative tech businesses unable to access funding.

“Convertible loans partially protect the taxpayer as the Government retains an equity interest in start-up businesses that cannot repay the loans within the 36-month term, says David Hough. “However, eligibility rules for the Future Fund scheme mean that accessing funding will be difficult for many technology businesses.

 

He added, “Companies need to obtain funding from private investors and have a history of raising finance from third parties in order for the Government to match the amount raised under the terms of the Future Fund. For many private investors, themselves feeling the impact of economic uncertainty, they may decide that now is not necessarily the right time to take on additional risk.”

 

In order to incentivise investment from private individuals, the Government should look to expand existing tax reliefs

David continued, “In order to incentivise investment from private individuals, the Government should look to expand existing tax reliefs, such as the Seed Enterprise Investment Scheme (SEIS).”

Genevieve Morris said: “SEIS provides Income Tax relief to investors at the point that they invest, and then additional tax relief in the event that the business fails, and the investment made is lost. This limits the downside risk to investors, whilst encouraging those who can to support entrepreneurial start-up businesses.

“However, the rules to qualify for SEIS are strict and limited to small businesses that have been operating for less than two years. The big brother of SEIS, the Enterprise Investment Scheme (EIS), is available to some larger (and older) businesses and also provides relief to investors, but the relief is less generous and therefore less attractive, particularly in the current climate,” she added.

Stephen Wheatley, co-founder of HearAngel ® the consumer brand of LimitEar, is passionate about encouraging the Government to extend the existing SEIS provisions to all EIS qualifying businesses in order to help secure private investment.

Stephen added: “If the Government have the political will, it would be relatively easy to extend the current SEIS provisions to allow qualifying EIS companies to raise, say £250,000 of new investment under the SEIS preferential terms. The systems and processes are already in place and it would give a boost to encourage private investors to support businesses when they need it the most.”

HearAngel® was developed in response to the World Health Organization Report on Hearing Loss in 2015 and is delivered as an embedded app or software in wireless headphones or earpieces, to provide sound exposure information for users so that they can manage and protect their hearing and avoid early onset hearing loss.

Stephen, who is also a founder trustee of UK Hearing Conservation Association, added: “We’ve spent over five years developing software that will help protect the hearing of adults and children. In under two weeks we’ve seen our business go from a position of strength to one of uncertainty. As things stand, we don’t benefit from the Governments Future Fund, and I know we are not alone. I urge the Government to consider how they could extend tax relief to investors to encourage them to support businesses during these difficult times.”

Rick Lowe, Master of The Guild of Entrepreneurs of which Stephen is a member, says: “We fully support this proposal and hope that the Government acts on it as it will a help a large number of early stage entrepreneurial companies through these challenging times.”

Many businesses that will be delighted at the announcement of the Future Fund, but also aware of many businesses that will not qualify

David Hough added: “We are aware of many businesses that will be delighted at the announcement of the Future Fund, but also aware of many businesses that will not qualify for a variety of reasons, and still face uncertainty about the long-term future of their businesses. Extending the SEIS relief for a short period of time would seem a simple and effective solution to bridge the funding gaps for these businesses.”

If the Government have the political will, it would be relatively easy to extend the current SEIS provisions to allow qualifying EIS companies to raise, say £250,000 of new investment under the SEIS preferential terms. Stephen Wheatley Co-founder of HearAngel
Co-founder of HearAngel

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