Raising capital for your startup with EIIS - Beyond Dublin

Business advice: raising capital for your startup with EIIS

How do you plan to fund your startup? More often than not, when a business is starting out the seed fund will end up coming from The Three Fs – friends, family and fans. However, this isn’t always a viable or attractive option. With no interest rate and often no fixed repayment date, the situation can easily become problematic. As the saying goes, ‘’The best way to make someone remember you is to borrow money from them!’’

For this reason, and many more, entrepreneurs look for alternative funding options. The Employment and Investment Incentive Scheme (EIIS) is one such example. Replacing the Business Expansion Scheme (BES), EIIS is a tax relief scheme offered in Ireland which aims to incentivise support for small to medium businesses with an organised managed fund. Small and medium businesses are defined in this case as companies with fewer than 250 employees and a turnover limited to €50 million (or gross assets limited to €43 million).

The Davy EII Tax Relief Fund 2016 successfully raised over €11.8 million in December 2016. (bdo.ie)

How does The Employment and Investment Incentive Scheme work?


If you choose to avail of EIIS, your investors will be individuals who prefer to invest in a tax relief managed fund. Individual investments are up to €150,000. This is a medium to long-term investment (of a minimum of 4 years) with no opportunity for an early exit. Investors receive tax relief on their income, with up to 30% of relief given in year 1 and 10% after the three-year period has expired. This tax relief managed fund is available to anyone with any source of income i.e. PAYE, Capital Gains Tax exposures, dividend income or rental income. The minimum someone can invest in a company is €250, but this can be divided per individual in a civil partnership/marriage. On the other hand, the maximum investment that can be made by an individual in any one tax year is €150,000, which can be divided amongst a group of companies.

The managed fund

Rather than a sole investor backing one company, the EIIS managed fund lowers the risk of investment by channelling multiple funding sources to several different companies, following the ‘Don’t put all your eggs in one basket’ maxim. Investors have the comfort of spreading the risk of their investment across multiple companies, and, in turn, the companies do not have to rely on individual investors for cash flow. EIIS is aimed at indigenous Irish companies with strong management teams and good cash flow. During the application process, it will be determined whether or not it is realistic that investors will able to exit after the four-year term. It is also expected that employment levels and average pay will increase over the term of the investment.

How can you use EIIS funding?

EIIS funding must be used only for purposes of employment (to pay employee wages) or maintenance of the company. Maintenance expenses include the following:

• buying stock
• light and heat expenses
• fixtures and fittings
• plant and machinery expenses
• purchasing premises to trade from
• extension of company premises


Aimed at small to medium businesses

Being approved for EIIS can be a lengthy process, making it better suited for large investments. EIIS is aimed at small to medium-sized businesses looking for investment in the range of €500,000 to €2.5 million.

No connected partners

With this attractive benefit of tax relief on offer, some would consider inviting The Three Fs to invest through an EIIS fund. However, EIIS is carefully monitored and rules in the legislation stop connected partners – an existing company shareholder, spouse, etc. – from benefiting from the program. The upshot is that investments are made by individuals not connected with the company.

Company type

Not all types of companies can avail of EIIS. For example, professional services companies, financing companies, futures trading, land development, shipbuilding, coal or steel industries, hospitality establishments, and film production companies would not qualify.

Maximum funding

The maximum amount a company can raise via an EIIS fund is €15,000,000, and the maximum that can be raised per 12 month period is €5,000,000.

The traditional ways of funding a new business venture were to secure a bank loan or turn to friends and family members. But lessons from the past are still fresh in our memories and new, innovative forms of funding have become increasingly popular. It is worthwhile exploring your options, as we did in our blog P2P lending and other alternatives to bank loans, and we think EIIS is definitely a promising contender.

At Beyond, we don’t just crunch the numbers… we also offer tailored financial advice for business development. If you would like support planning the future of your business and beyond, call us on 01 639 2963.