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New rules may give SMEs easier access to equity funding

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The Government has brought forward two changes in the law to help smaller firms gain access to equity finance. The changes mean that fewer small firms will be caught up in the prospectus regime.

SMEs can now raise equity finance of up to 5 million euros rather than the previous limit of 2.5 million euros before a prospectus needs to be drawn up. They can also target a larger number of potential investors, up from 100 individuals to 150.

The changes are a result of the Government’s decision to introduce amendments to the EU Prospectus Directive, agreed by the European Commission, a year earlier than originally planned. The new rules apply from 1 August 2011.

John Walker, national chairman of the Federation of Small Businesses, added: “We welcome the fact that the Government is leading the way in Europe by making it easier for small business to access finance. More small firms should look at equity finance as an alternative route to accessing credit, and these simple changes will help firms who are looking to grow and invest.

“Extending the number of investors and increasing the prospectus value will help more small businesses access equity finance and show there are more options than just going to the bank for credit. What’s important is that small businesses are aware of the alternative routes to finance.”

If your business is looking to grow but is finding it tough to secure the finance, we would be more than happy to offer you our expertise on the best sources of funding.