SME Investment – Opportunities for Investors
Build your portfolio with SME investment opportunities
If you’re an investor looking to build your portfolio, one avenue worth considering is SME investment – offering financial backing to a small or medium sized business in exchange for a stake and profit share.
It’s no secret that SMEs are a driving factor in both economical and innovation terms, with many holding great potential for growth. For some, SME investment seems a little risky – and it can be, with many smaller businesses failing to get off the ground in a sometimes challenging global climate. However, where some fail, many others thrive, and with the right approach and investment advice you could soon find yourself reaping some significant rewards.
But what opportunities are out there in regards to SME investments? Here are a few of the key types to explore, with varying degrees of risk.
Key opportunities for SME investments
When people hear the term ‘SME investment’ they often think of crowdsourcing – but that’s for the small players, not serious investors looking to grow or diversify their portfolios.
Here are some more appropriate ideas, depending on the level of investment and input you’re interested in making:
Angel Investments – if you fancy injecting some cash into a start-up while also acting in an advisory role to said business, this could be for you. You’ll have more control over the company’s operations along with your shares, but you’ll need to do your homework in terms of viability and take an active part in its development.
Alternative Investment Market (AIM) – The aim of AIM is to provide investor access to SMEs that are not available on the London Stock Exchange. This means that your investments are a little less stable, but on the other hand, a sound investment will stand to bring you some great returns.
Equity Investments – pretty much as it sounds: you provide a capital injection into the business (generally cash) and receive a profit percentage by return. However, you’ll also be liable for covering a percentage of any losses if the business fails to perform.
Debt Investments – this type of SME investment is on a loan/bond basis. Your kickback is in the form of interest income usually issued twice-yearly, and eventual repayment of the initial loan amount.
Enterprise Investment Scheme (EIS) – a government scheme designed to encourage investment in higher-risk businesses by offering a range of benefits for investors, such as 30% income tax relief on your investment amount and capital gains tax relief on profits after share sales. We’ve written a beginners’ guide to the EIS here if you’d like to learn more.
Advice on investing in SMEs
We’ve helped many investors to secure and manage their portfolios, helping them to identify the best options for their specific needs, so if you’d like to speak to one of our team, do feel free to drop us a line or click here to request a brochure.
We always recommend seeking support from a professional before you go ahead with any SME investment – or indeed any other kind – plus make sure you conduct all your due diligence before you sign anything or forward any funds.