Banks still over cautious, how about an external investor?

My interaction with clients, we still find banks are still over cautious, when it comes to lending money, to healthy companies, which have a new idea or a new major customer to fulfil.  I understand the reluctance to lend money for day to day activities, but when a company has developed real innovation, it needs money to make it happen and this is currently being stifled.

Despite government ownership of some the major banks, the Government have improved tax incentives for high rate individuals to invest in companies, to stimulate innovative company growth.  These tax incentives are incredibly attractive to an individual. With low savings interest rates, high income individuals are looking for potential large returns, from a medium risk investment.

For an individual they can receive a 30 percent tax relief on an investment, this relief can be further increased if they are offsetting a capital gain. For further details on Enterprise Investment Scheme or more importantly Seed Investment Enterprise Scheme and the amount of taxrelief, and the companies that qualify see www.hmrc.gov.uk/eis.

Traditional business owners, are reluctant to sell shares in their company, however with the change in the financial market, it may be more attractive dealing with an individual versus a bank.

Author: Tim Jenner- Small Business Advisor, member of SGBA (tim.jenner@sgba.co.uk)