Two ways to maximise your business profit

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We all want our companies to turn the best profit possible. Advertising, technology, expansion into other markets and offering fresher and better services and products all cost money — so how do you get the cash to finance them?

Getting ahead of the next trend in your industry is key to your company’s success rate, but raising funds to do this is often difficult. Current Capital, an expert in business investment, recommends two valuable funding options that can take your company to the next level.

 

Crowdfunding

Crowdfunding is a huge step forward in investment. This initiative helps to raise cash, boost brand awareness and increase support for a business or project in just a few simple steps. Crowdfunding is a key fundraising tactic for all companies, but especially small business which might have been rejected by several banks. The ability to appeal to investors directly (including the public) has cut out a lot of admin and shaved off significant time in the investment process. Now, businesses in need of cash can raise money for an idea in return for a share in the business.

 

What was before crowdfunding?

Previously, investors heard of potential business opportunities via accountants, financial advisors or even just through the grapevine. Obviously, this wasn’t very efficient and a lot of chances for crucial investment in emerging companies were missed.

But the difficulty didn’t stop there. Once you heard of an opportunity you were interested in, you then needed to self-certify to become a legitimate investor — only after doing this were you given an application form about the opportunity. If you were still interested in the investment after this point, the next step was to sign an Investment Memorandum, before negotiating the terms of the investment. Even then the process wasn’t complete, as significant ‘know your client’ procedures needed completing before funds were transferred to a lawyer’s account. As you can see, this was a sluggish, tedious process that also required investors to cover any associated costs.

Today, crowdfunding has revolutionised the process, making it faster, easier and more efficient for both sides.

 

Advantages of crowdfunding

There are several positives associated with crowdfunding, including:

  • Alternative: it’s a great option if you’ve been turned down for funding via more traditional routes.
  • Potential for extra funding: this includes grants for a charity or community group, and loans or a pre-cursor to an equity crowdfunding campaign for businesses.
  • Speed: it’s typically a quick way to get the funds you need.
  • Endorsement of your business idea: if the public or investors are willing to put money into your company, they clearly agree with your strategy which is a great sign for its future success.
  • Improvement of marketing techniques: thinking up and launching a project via crowdfunding will sharpen your skills to market business ideas, which will help improve the success rate of other campaigns.
  • Build a key support group: crowdfunding rallies advocates and boosts loyalty for businesses and ideas, which can prove essential when the project develops.

 

The Enterprise Investment Scheme

Another option for investment is the Enterprise Investment Scheme (also known as EIS), which the government is promoting as a way for companies to attract funding from qualifying investors and subsequently become more successful.

The EIS launched to assist smaller, higher-risk companies. The idea was that it would provide a variety of tax reliefs to investors who buy new shares in these companies in order to encourage investment that might otherwise have gone to more established or ‘safer’ franchises.

 

Advantages of the Enterprise Investment Scheme

The EIS offers the following benefits:

  • 100% inheritance tax relief after two years, if the investment is held at the time of death.
  • Delay of Capital Gains Tax for the life of the pledged investment.
  • 30% income tax relief on the investment. This can be anything up to a maximum of £1 million in the 2017/18 tax year and/or £1 million, which is can be carried back to the 2016/17 tax year for at least three years.

 

Example of EIS

Going down the EIS route means that, if a taxpayer in the UK invested £100,000 into a qualifying company, they will then get a £30,000 tax rebate from the HMRC. But, just as long as their income tax liability has exceeded £30,000 in the current or previous tax year.

If you’re still not sure and want more information, take a look at gov.uk.

Regardless of your choice of fundraising, both these initiatives have the potential to boost your company’s performance.

 

 

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