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Nextfin Comments On The Save Our Startups' Campaign, CBILS and The Self Employed

Posted 8 months ago

Nextfin Comments On The Save Our Startups' Campaign, CBILS and The Self Employed
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Author: Sacha Bright & Oliver Murphy

In response to the financial risks posed by Covid-19, co-founder of Crowdcube Luke Lang has announced a new campaign aimed at helping entrepreneurs struggling to operate during the pandemic.

In the UK there are believed to be over 30,000 startups and early-stage businesses - accounting for around 330,000 people.

In an email circulated on April 5, and in conjunction with the publication of an open letter to the Prime Minister, Crowdcube launched the Save Our Startups (S.O.S) campaign - an opportunity for “founders employees, shareholders, customers and the wider ecosystem support Britain’s startup and high growth businesses to tell the UK government what needs to be done to protect their future.”

According to the letter, Crowdcube is calling on the government to follow a ‘three-point plan’ which includes: providing an equity-based liquidity package to save startups at risk, fast-tracking payments to startups from public schemes and changing the EIS and SEIS to stimulate private equity investment into startup businesses.

The letter stated: “Without support, thousands of startups will fold in the coming months. The Government should provide a fresh capital injection for startup and high growth businesses through an equity-based solution.”

Although the CBILS has been extended to cover a larger proportion of businesses, a number of start-ups are loss-making and could be at a disadvantage when it comes to securing a government-backed loan. 

Lang has urged the government to make changes to the SEIS and EIS to encourage private equity investment, pointing to programs implemented by France and Germany. Already, governments across Europe have been putting measures in place to protect entrepreneurs, including a European-wide investment initiative estimated to be around £33 billion.

Nextfin has also called for the EIS and SEIS allowances to be increased to stimulate investment and protect jobs. These schemes reduce the risk of backing early-stage businesses. Many small companies and early-stage businesses will not qualify for CBILS or any type of loan, simply because they will not be able to repay it. The solution lies in equity funding.

The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) have been responsible for almost £20 billion worth of private investment to create and drive the growth of over 27,000 businesses.

The Save our Startups campaign has received support from over 2000 signatories including; Nextfin, Draper Esprit, Virgin Startups, Founders Factory and Runway East.

You can sign Crowdcube’s S.O.S open letter here.

Responding to the launch of the campaign, Chief Executive of Nextfin Sacha Bright said: “We are in full support of Crowdcube’s initiative, and greatly welcome the calls to change the EIS and SEIS which have a proven track record of encouraging investment and creating jobs”.

Nextfin is the online alternative finance aggregator, which receives over 50,000 investors and entrepreneurs to its platform per month.

CBILS delivery needs to be changed

Chief Executive of Nextfin, Sacha Bright, in a letter to the Chancellor, has recommended that the CBILS should be extended to all regulated P2P lending sites.

The letter states: “The government needs to recognise that a good way to get money to small businesses quickly is to extend the loan to all regulated P2P lending sites. Banks are simply not structured to process hundreds of thousands of SME loan applications at one time.”

"As a consequence, far too many businesses could go to the wall unless P2P lending sites are brought in to assist with processing loans.”

He added: “In doing so, the government could provide P2P lenders with a guarantee of 80% on each loan to give investors further confidence to invest through P2P platforms, thus giving them capital to lend to early-stage businesses - many of whom rely on these loans to survive.”

Too many self-employed are falling through the net

Nextfin has also proposed that the government pay owner-managers a fixed sum of £2500 per month, or match the provisions of the Self-Employment scheme based on dividends for directors that are drawing less than £50,000 per year.

To see why this is essential, you can visit our recent article on the ways in which the government can protect jobs and stimulate the economy.



Disclaimer:

To the best of our knowledge, the information we have provided is correct at the time of publishing. SEIS and EIS tax benefits are dependent on your financial circumstances. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed. 

Risk Warning:

Investing in equity crowdfunding and early-stage businesses involves high risks, which may include long-term investment horizons, illiquidity, lack of income and potential dilution. Any investor needs to be in the position to afford a total loss of capital invested.

NextFin is targeted at members who have the knowledge and experience to understand these risks and make their own investment decisions. You will NOT invest through NextFin but through the relevant crowdfunding website which also has signed off the content as a Financial Promotion on its own website. NextFin is not the originator of the financial promotions that appear on its site. However, we do to the best of our ability carry out limited compliance checks on the originator and the company seeking funding to ensure they are conforming to FCA regulations and anti-money laundering equity/requirements as appropriate. Business Agent Limited, trading as NextFin, takes no responsibility for this information or for any recommendations or opinions made by the companies or its users. Click here for our full risk warning.

 

Tagged: News Entrepreneurs



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