Three things to consider when choosing an EIS investment

Investment Timing

Written by J S

January 12, 2023

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Welcome News for SEIS Investors

Launched in 1994 and introduced as a part of the government’s venture capital schemes, the Enterprise Investment Scheme (EIS) is designed to encourage investment into early-stage companies with the potential for high growth.

A well-established staple for experienced investors, it offers vital funding to help grow emerging privately owned companies in a wide range of sectors and industries. Moreover, the investor tax breaks combine with the benefits of portfolio diversification to make the EIS a highly attractive opportunity.

The EIS allowance is £1 million, which equates to £300,000 in income tax relief. The EIS allowance increases to £2 million if you’re investing in knowledge-intensive companies, meaning you could claim up to £600,000 in income tax relief.

Holding multiple potential exit routes, Capital Gains Tax deferral, Loss Relief and an upfront 30% Income Tax Relief, EIS gives investors financial benefits alongside the opportunity to create measurable change.

So, what factors should you consider when choosing which EIS-qualifying startups to invest in?

1. Align Your Portfolio With Your Goals

You must be clear about what you want and need your portfolio to achieve. Whilst there’s no guarantee you’ll make considerable returns, by correctly diversifying your portfolio, regularly investing and having a long- or medium-term investment outlook, you can take advantage of price swings and set yourself up for success. Choose an appropriate mix of investments and maintain a contingency fund.

2. Research The Business Model

Pick an industry that you understand and one that interests you. Research the market demand and weigh up the company’s potential. For example, is the product or service likely to be a fleeting trend or will it provide cutting-edge longevity? Consider the skills of the management team, delve into early sales and marketing and how well the brand has been received with proven track records.

3. Market Ebbs And Flows

Despite rising inflation, geopolitical uncertainty and an underperforming economy, turbulent times create opportunity. Sectors that bear up under the pressure of a downturn provide goods and services that increase demand and offer sustainable solutions or cheaper alternatives when the market is in decline. Even when the economy is weak, these sectors represent areas that consumers still need and want to spend money on.

Driving Investment
Discovering early door opportunities, Westbrooke Associates is the brokerage responsible for driving investment into innovative, sustainable and disruptive start-ups to expand, scale and meet demand. To learn more about SEIS and EIS, please visit our website and download your free guide.

Westbrooke Associates identify a wide range of investment opportunities, backing the businesses you believe in, including EIS investment opportunities. Register your interest today and explore how we can help you target and capture attractive returns.

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