The Risks Directors Should Avoid

Access to funding is still a key challenge for the UK’s entrepreneurs. With the banks still convalescing and austerity measures starting to bite, early stage and smaller businesses might be justified in wondering how they will raise cash for expansion or survival.

Luckily, the business angel community is riding to the rescue. More and more private individuals are investing anything from hundreds to hundreds of thousands in entrepreneurial businesses, often helped by increasingly generous tax reliefs under the UK’s Enterprise Investment Scheme (EIS). If you have a sensible vision, a strategy that’s capable of delivering long term value and a well thought out business plan, a business angel might be the heaven-sent answer to your funding prayers.

Type “Angel Networks” into Google and you’ll get a plethora of results. There are a large number of formal and informal networks to choose from. Some, but not all, can be found via the British Business Angels Association’s member directory.

Take great care when selecting your angel. Some will want to be (heavily) involved in your business and some won’t. Find out who else they’ve invested in and speak to the management about their approach. As this is likely to be a long term relationship, their character and attitude will be important. Advice from a friendly mentor may be welcome but you won’t want to find yourself in partnership with an interfering or controlling individual. Business is hard enough without having to manage difficult and potentially destructive relationships.

As the economy struggles to recover, today’s articles consider the ‘twilight zone’ occupied by many businesses and their directors and look at how tax efficient funding under the EIS might be brought to bear. We also revisit the need to reduce ‘owner dependency’ to create real value in your business — an essential feature if you are seeking new investors. Finally, we alert you to the provisions of the UK’s new Bribery Act and the actions you can take to protect your business.

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