Having spent many years in the corporate environment, it is exciting to be involved in the SME world (the 'real' world many would say) assisting business owners achieve their goals & dreams. There are of course various challenges facing the SME owner today, not least of which are raising finance, securing additional capital & increasing the net worth of their business.

Ideally, the purpose of this blog is to create a forum for small business owners to discuss these & other challenges but at the same time, finding possible solutions to their needs & wants.

There was an exciting development on the SME front earlier this year - an Act was promulgated in January 2009 (Revenue Laws Amendment Act) incentivising individuals & listed companies to invest in small businesses. Investment funds from both of these will be pooled into vehicles known as Venture Capital Companies (VCC) - parties investing into a VCC will be eligible for a 100% tax deduction subject to certain conditions & criteria. In turn, in order to qualify for this deductible investment status, the VCC must invest in a portfolio of small businesses. The minimum VCC size must be R 30m with the bulk (80%) of the investments directed at companies with a book value not exceeding R10m after the investment. The tax deduction comes into effect on the 1 July 2009.

It will be interesting to see what response there is in the market from existing & new venture capital players - capital is of course scarce at the moment & investors are extra cautious. However, the tax break high net worth individuals would receive (albeit a tax delay until the investment is realised) should prove very attractive. The benefits to SME owners would be significant ie. :

• Capital can make a difference between an average & great company - there are many solid businesses that lack the capital to grow & expand
• A well capitalised business has a greater ability to borrow & invest in capital equipment - how often have you heard of your bank mention that your business is undercapitalised & your company's borrowing limit has been reached ?
• The introduction of the right investor could provide much needed support both operationally & strategically

There has been a delay in the release of the application form required to register a VCC & is now expected towards the end of June 2009 - as a result, one could expect approaches by new VCCs to targeted small businesses late this year.

This of course leads to the question - as a small business owner, are you prepared for an approach by a VCC who could be interested in buying a share in your business ?