Small businesses raised £1.46 billion through the enterprise investment scheme (EIS) in 2013/14, the highest ever annual amount lent through the scheme, official figures show.
This is a 41% increase on 2012/13 when £1.03 billion was lent by investors.
The previous record was set in 2000/01 when £1.07 billion was raised through the EIS.
HMRC data shows that 2,710 small companies raised funds through EIS in 2013/14, up 10% from 2,465 firms in 2012/13.
Funds raised through the seed enterprise investment scheme (SEIS) also saw large increases, with participating firms raising £164million in 2013/14, up from £86 million in the previous year.
Participation in the SEIS also grew dramatically last year with 1,995 companies benefitting from the scheme in 2013/14, up from 1,155 in 2012/13 – an increase of 73%.
The EIS and SEIS promote investment in smaller, higher-risk businesses by offering generous tax reliefs to investors.
Gary Robins, director at Radius Equity, said:
“EIS and SEIS are proving increasingly popular amongst investors, as they are now just 2 of the government-endorsed investment schemes with generous tax breaks.
“The tax breaks the government has put in place are attracting huge numbers of start-ups and investors which is encouraging growth and proving a boost to the economy.”
Jimmy McLoughlin, deputy director at the Institute of Directors, called on the government to do more to promote the schemes to investors:
“Investing in a business should be as easy as opening an ISA. But for millions of people this isn’t the case. The process is excessively complicated, time-consuming and daunting.
“The government needs to play its part in encouraging a step-change in the way investment schemes are regulated. EIS and SEIS should be actively promoted and made as simple as possible to invest through. If the government is serious about helping small businesses scale up, then these are the vital first steps.”