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Traditionally investments in large companies that already trade publicly have been an option for investors.
But things have changed. Today, there are many ways you can invest in small businesses. Start-up companies often have some of the most innovative ideas out there which is why shrewd investors should take notice.
Read on to see why small companies make good investment opportunities.
Get Involved at the Start
Investing in a company in its infancy can be exciting. Getting involved right at the start of a company’s journey and watching it grow and succeed can be a satisfying thing to be a part of.
Researching which areas interest, you the most can be worthwhile as you may already have experience investing in this area. You could discover some brilliant companies which need investment, but you should consider the potential for returns and the risks involved before investing.
Why Small Companies?
Early-stage companies are often much more flexible than established businesses. They can offer some of the most innovative new products and ideas in the business world. The business owners will often have a strong understanding of the market and will be kept informed of developments.
For SMEs to achieve ongoing success they need to grow. Because of their thirst for growth, they tend to be fast-moving and eager to explore different ways to expand. This can mean they can offer strong returns, but they are considered higher risk investments.
How Can I Invest?
There are different ways to invest in small private companies from crowdfunding to venture capital to angel investors. Investors have been attracted to the potential for substantial growth and returns.
One popular option for venture capital investments is Enterprise Investment Schemes (EIS). The EIS funds invest in early-stage companies. The funds are split between different companies which helps mitigate the risk associated with investing in start-ups.
This in turn means investors benefit from a more diverse portfolio.
What are the other Benefits?
Not only does investing have the potential to deliver excellent returns for investors but start-ups contribute substantially to the economy. From employing staff and putting themselves into supply chains small businesses play an important role in the UK economy.
Investing in a new business can inject new opportunities into a community and help it grow. Not only that but it could develop into a major corporation in the future with help from your investment.
There are also potential tax benefits to investing in EIS which include income tax relief on the amount invested and exemptions from capital gains tax.
There are other tax benefits too; Oxford Capital has a useful introduction to the tax benefits of EIS. It is worth noting that the individual circumstances of each investor affect these reliefs and limits and there are risks associated with investing in EIS schemes.
Summary: Help Grow Tomorrow’s Big Businesses
By investing at the start of a company’s success story there’s great potential for high returns. It can also be an opportunity to grow your business network and link up with like-minded entrepreneurs.
If you want to start investing in small companies, there are a lot of factors to consider. Start exploring start-up companies in the areas that interest you, and the partners that can help you invest in them.
Although there are risks associated with these types of investment the potential is there for you to be a founding part of the next big success.
- CEO - ClickDo™ & SeekaHost™ | Started as an SEO Consultant and helped over 400 UK business owners grow their business with online marketing and Google advertising. More details about Fernando Raymond are available at www.fernandoraymond.com.
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