How To Secure SEIS / EIS Funding Easily

If you’ve found yourself here, it’s probably because you’re interested in finding advice or recommendations on how you can secure funding for your company – but without all the unnecessary fuss. That makes sense. Many funding sources are overly complicated and can actually deter both investors and businesses. If you’re looking for a straightforward guide to securing business funding, our simple guide to EIS and SEIS might just be the ideal read for you.

EIS stands for the Enterprise Investment Scheme, while SEIS stands for Seed Enterprise Investment Scheme. These are the UK government’s funding resources that set out with incentives to prompt more investments in upcoming and medium sized businesses.

The incentives encourage investors to support both new and established businesses by offering benefits such as income tax relief, tax breaks, deferred capital gains tax payments, and more.

You likely already know just how crucial funding is to any new business, no matter the size of the company. The saying goes, “money makes the world go round”, and in the world of business; that’s a notion that is probably at the forefront of your mind as you go about your day.

This is why the SEIS and EIS schemes are a great step up for many companies looking to get started off on the right foot, with even greater opportunities to secure funding than ever before. So, if you’re applying to be a part of the scheme on behalf of your business – it’s imperative you get it right.

In this article we’ll outline a comprehensive and easy to follow guide on how you can secure SEIS or EIS funding easily. The guidelines surrounding the two types of funding do differ, and you might be here wondering which version of the scheme applies to you. There are even some pointers to note down for investors. Don’t worry, we’ll explain.

Should I Apply for SEIS Funding or EIS Funding?

We’d recommend that if you are eligible for SEIS or EIS funding that you do apply, since it’s a lucrative business opportunity that opens many doors regarding the future potential of your company. There are a few limitations in that the maximum amount any company can raise from within the EIS scheme is £5 million per year – or £12 million throughout the duration of your company’s lifetime.

The maximum you can raise from SEIS funding opportunities is £150,000.

These aforementioned figures also include any finances raised from venture capital trusts, some forms of state aid, and social investment tax relief. 

EIS / SEIS and Qualifying Trades

No matter whether you qualify for EIS or SEIS, the money financed through SEIS / EIS must be used to participate in a qualifying trade, or to prepare to engage in a qualifying trade. This means that investments must be put back into the company in a way that aims to grow the business. Essentially, the finances should be utilised as best as possible to maximise profit.

Not all business types qualify as qualifying trades, however. EIS and SEIS funding is all about the potential for innovation and development, and so there are some ‘excluded activities’ that you cannot use your tax free investments on. If over 20% of your business activities are based in areas such as property development, fuel production, electricity exportation or farming activities, for example, your investors will lose out on their tax relief opportunities and in turn, you may lose the right to those investments. You can read the full list of qualifying trades here.

For many companies, this is a great opportunity with the potential to help maximise growth and innovation, considering that the most substantial element of business activities is not centered around non-qualifying activities. Most businesses should have no problem with this.

But before you do anything regarding your SEIS or EIS application, you’ve got to determine which of the two types of funding is right for your business. Here’s how they vary.

What is EIS Funding?

The Enterprise Investment Scheme (EIS) is the umbrella term for the funding system, and largely applies to those medium sized companies that apply for the scheme, since the level of investment support they become eligible to receive is much bigger. Those much smaller or brand new companies wishing to find more potential investors are more likely to fall under the criteria for the Seed Enterprise Investment Scheme (SEIS). The clue is in the name!

Either way, to apply for SEIS or EIS, your company must be UK-based, and must not be a limited partnership business (an LLP business). You must also not be trading on the stock exchange, nor be planning to trade.

If you fit those two criteria, you may be eligible for SEIS or EIS funding, so that’s the first step out of the way, easy.

To apply for (and be eligible for) EIS, you can:

  • Have up to 250 employees
  • Have been trading for up to 7 years or less. This timeframe applies to the period before any scheme shares are allocated.
  • Have up to £15 million in company assets. Again, this timeframe is related to before you receive any EIS scheme funding.

What is SEIS Funding?

Comparatively, the Seed Enterprise Investment Scheme (SEIS) follows very similar criteria but applies to brand new business ventures rather than those that are already somewhat established, such as SMEs. The only differences between SEIS and EIS funding are quantitative. That is, differences in elements such as the size of your company, the amount of assets you have, the timeframe you have to issue shares depending on your initial trading date, and the amount of investments that can be received under the scheme. Here are the differences.

To apply for (and be eligible for) SEIS, you can:

  • Have up to 25 employees
  • Have been trading for up to 2 years or less. Just like with SEIS, this timeframe also applies to the period before any scheme shares are dispensed.
  • Have up to £250,000 in company assets. Again, this timeframe is also related to before you receive any SEIS scheme funding.

Have you realised you’re eligible for either SEIS or EIS? If so, read on to discover our handy guide to successfully applying for either scheme, with ease.

Investor Guidelines for SEIS and EIS 

Another element of securing funding to consider is that there are also guidelines for SEIS and EIS investors, too. So while you might currently be focused on whether you meet the criteria from a business perspective, it’s vital that you and any potential investors also look into whether they fit the guidelines as well. These guidelines are clearly outlined on the gov.uk website, explaining how tax relief for investors using venture capital schemes work.

If both you and your potential investors (if you have secured any interest at this point) are satisfied with the terms and conditions of the SEIS / EIS system, you’re ready to go ahead and apply to be considered for the scheme.

The SEIS and EIS Application Process Explained

Now that you understand all the guidelines involved in determining whether you, your company and your potential investors are eligible for the scheme, it’s time to get started on your application. There are a few stages involved, but we’ll guide you through the process to make everything as clear as possible.

  1. Check Your Eligibility

Just as we’ve outlined above, you’ll now have an idea of which scheme you are eligible for.

  1. Apply for SEIS Advance Assurance

The next step in any application for the Enterprise Investment Scheme is to apply for Advance Assurance. You don’t formally need this SEIS Advance Assurance qualification to secure investment commitments, but it is a solid certification that your investors can reference when committing to invest in your company. It’s worth making sure you’re eligible for those tax relief benefits, and most investors won’t commit without that reassurance from HMRC!

  1. Get Your Unique Taxpayer Reference Identification Number

To get started with your application, you’ll need your UTR. This is also known as your Unique Taxpayer Reference (UTR), or it could just be referred to as your Taxpayer Reference in some instances. It’s the ten digit number that you will have received back when you applied for Companies House registration, and it’s the code the government use to identify your business for tax purposes. You might find you’ve misplaced your UTR since you registered your company, in which case you can retrieve a new one from the government website.

  1. Create a Detailed Business Plan

Obviously, funding schemes look for some reassurance that you do have a solid business plan in place. There are financial risks involved with running any business, and both the government and your possible investors will want to know you have a well planned out strategy ahead of you. If you’re serious about running your company, or if you’re an SME that’s already been set up and established, you probably already have some form of business plan in place.

The difference here is that you should include specific contents that will help showcase that you are forecasting your business plan both sensibly and honestly. Here’s what to include, and how to pull together your ideas in such a format.

  • 3-Year Business Plan
  • Finance Forecasts
  1. Information About Your Potential Investors

While you’re thinking towards the future here in most cases, SEIS / EIS applications require that you put forward the details of investors that may choose to invest in your business.

This does help application reviewers to determine that your plans to receive SEIS / EIS funding are not just speculative. They need to know that you have put the efforts into finding your investors and communicating your intentions to secure funding from them pre-application.

  1. Identify When You Started Trading

This is a key step in applying for SEIS / EIS Advance Assurance. Since the date you started trading links into some of the criteria for whether you qualify for the scheme to begin with, determining this trading date accurately is essential in making sure your application is successful.

Your trading date is the first date from which you began receiving revenue as a company. It’s not automatically the date you registered with Companies House – though it can be, if you did start generating revenue on the very same day you registered.

The importance of getting your trading date right is because of the timeframes within which you must issue secure SEIS and EIS shares. For secure SEIS, you need to begin issuing shares within 2 years of trading. This is why SEIS is for start-ups, new companies that are just getting their feet off the ground. For EIS, you must issue shares within 7 years of trading. No matter which form of funding you’re going for, determining your trading date and clearly specifying it in your Advance Assurance Application is key.

  1. Include Details on ‘De Minimis Aid’

De Minimis Aid refers to any amount of ‘minimal’ monetary investments or grants you might have been offered as your business has been growing. Many universities offer De Minimis Aid to help graduates get their feet off the ground, and any such funding grants need to be outlined within your SEIS Advance Assurance application. Other forms of De Minimis Aid might include government grants. The reason you must identify any amount of investments in this application is because it will have an impact on the amount of SEIS / EIS investment funding you can receive in the long run.

  1. Your Cover Letter

As with most situations that require the submission of a cover letter, this part of the process should be where you resonate with the reader and outline information that’s priority for them to see. This brings clarity and strength to your application, and we all know that admin tasks are frustrating when we have to hunt down information for ourselves. Make life that little bit easier for those application reviewers!

Here’s your cover letter summary for your SEIS / EIS Advance Assurance application. Once you include this information as priority, you can rest assured you’ve got all the vital information right at the forefront of your application.

An Introduction

  • Explanation of what your company does
  • Unique selling point – what makes your company special?
  • Outline any achievements you’ve made
  • What are your company’s goals? Think long term and short term.

Funding Rounds

  • Documentation of funding rounds – money you’ve raised for the company thus far
  • Past funding rounds
  • Upcoming funding rounds and plans

Your Potential Investor Information

  • Name
  • Address
  • Investment amount(s)

Financial Summary of Your Company

  • Historical (past) financial situation
  • Expense budgeting for the future
  • Sales forecast estimates
    (you can even break these down into detailed sectors, like market segments or B2B vs. B2C channels)
  • Cash flow
  1. A SEIS / EIS Documentation Checklist

We’re getting there, almost done. So the final part of your SEIS / EIS Advance Assurance application is to make sure you’ve pulled out all the stops and prepared all your documents correctly. Here’s what you do need to include as part of your application:

  • Unique Taxpayer Reference Identification Number
  • Cover Letter – ensure you’ve included the above details!
  • 3 Year Business Plan & Forecast
  • Financial Forecasts
  • Bank statements
  • Previous grants and funding information, i.e. De Minimis Grants
  1. Completing the Application Form

Your SEIS / EIS application should be emailed to: enterprise.centre@hmrc.gsi.gov.uk 

If something has changed regarding your business and the conditions you have previously met to meet the criteria for SEIS or EIS, you need to notify HMRC within 60 days of putting in your application.

Applications usually take up to 8 weeks to process, though timings may differ during busy periods. You might even hear back from them earlier.

Granted that your application is approved, you will be notified by HMRC of your success. Once you receive your certificates you will notice your unique investment reference number on the form. This is the number you should provide your investors with so that they can then benefit from the tax relief incentives related to their investments in your company.

And there you have it – how to apply for EIS / SEIS in 10 easy steps. It’s not as complicated as it sounds!

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