Fintech founders have criticised the government-backed EIS and SEIS programmes that help
start-ups raise investment from private investors as excluding too many types of financial
services businesses. With worries over how the Covid-19 pandemic will impact the ability of
fintechs to raise capital in the months ahead, founders have called upon greater
government support to help them survive. One suggestion is relaxing SEIS and EIS eligibility
rules to include more categories of fintech start-up.
Both the Seed Enterprise Investment Scheme (SEIS) for early-stage start-ups and Enterprise
Investment Scheme for growth-stage start-ups offer private investors attractive tax breaks
as an incentive to taking on the risk of backing young companies. But the current eligibility
rules exclude companies with any of the following activities, shutting out many, if not most,
fintechs from a valuable funding opportunity:
- Dealing in land, in commodities, in futures or in shares, securities or other financial
instruments. - Banking, insurance, money lending, debt factoring, hire purchase financing, or other
financial activities. - Leasing (including letting ships on charter or other assets on hire).
- Property development.
The feedback of fintech founders on how they see the extent of government support for
their sector was canvassed as part of the Summer Survey of Fintech Founders, supported by
treasury minister John Glen MP. The survey showed that 75% of founders thought that the
government has supported the wider economy well during the Covid-19 pandemic.
However, in contrast, only 25% felt the government has supported the fintech sector well
through the crisis.
While over a third of fintech founders see a longer-term silver lining to the pandemic, with
its acceleration of digital transformation expected to open up new opportunities for the
sector, 90% believe raising finance will be harder over the next year. For almost half of those
surveyed, 46%, see limited access to capital as their most pressing challenge and the most
significant impact of the pandemic on their business.
The worry is that a lack of liquidity could put many fintechs in danger of being unable to see
out the Covid-19 crisis, missing out on longer term opportunities it is expected to create. As
well as greater access to SEIS and EIS, fintechs would like the schemes to be made
compatible with the future fund scheme, which offers convertible loans to companies facing
financial difficulties as a result of the coronavirus pandemic.
A further criticism of government support for the fintech sector is the perception non-bank
lenders have lacked the same support for liquidity to continue ongoing lending. Fintech
founders want access to treasury funding lines, so that they can compete on a more level
playing field with larger banks.
