Enterprise Investment Schemes – Tax efficient investing for serious investors
The established businesses listed on the GrowthFunders equity crowdfunding platform offer you the opportunity to invest in businesses which are Enterprise Investment Schemes compliant and support growing UK companies.
What are “established businesses”?
- have usually been trading between for 2 years or more, so will have an element of trading history,
- will be generating revenue and profitable.
- are unlisted pre-IPO companies and are still considered high risk by nature.
- may be deemed to have a lower risk profile than start ups and early businesses.
If the businesses you invest in are Enterprise Investment Schemes compliant, you will benefit from some significant tax reliefs. This can help enhance returns and mitigate risk, which means investing in unlisted established businesses can be exciting and rewarding.
What are the risks?
Investing in unlisted companies (start-ups, early stage and established businesses) can be very rewarding, however it also involves a number of risks.
If you choose to invest through the GrowthFunders platform, there are five important considerations you need to understand and accept;
- Loss of Capital – Start-ups, early stage and established businesses may fail and you may lose all of your investment.
- Liquidity – There is no secondary market for any investments made through the GrowthFunders platform. Therefore you will only be able to sell your shares when and if the company floats on a publicly listed stock exchange, or is bought by another company.
- Dividends – Unlisted companies rarely pay dividends. Companies tend to reinvest profits to grow and build shareholder value.
- Dilution – Any investment you make through the GrowthFunders platform may be subject to dilution. This means that if the company raises additional equity funding in the future, it will issue new shares to new investors and the percentage of the business you own will decline.
- Diversification – Investing in unlisted companies (start-ups, early stage and established businesses) should be done as part of a diversified investment portfolio. To spread risk you should invest smaller amounts in multiple businesses.
What about the rewards?
Building a portfolio of unlisted companies can result in a significant, overall return on investment. The businesses that do well can provide exceptional returns which can more that make up for the businesses that don’t succeed.
Download the Nesta report to find out more.