Financial Modelling for a SEIS or EIS Round: what changes

There’s plenty written about SEIS and EIS eligibility and advance assurance. There’s far less on what the schemes do to your financial model – which matters, because the money arrives with conditions attached to how and when you spend it.

Get the model right and it does two jobs at once: it’s the plan you run the business on, and it’s the evidence HMRC and your investors want to see. Get it wrong and you can put at risk the relief your investors are counting on.

In this blog, we’ll explain how the scheme conditions constrain your spending plan, what the timing of funds does to your cash forecast, and what to have modelled before you apply for advance assurance.

The money has conditions on how it’s spent

SEIS and EIS funds must be used for a qualifying business activity within a defined period, and the rules on what counts are narrower than general working capital.

That has a direct modelling consequence. Your forecast needs to show the funds being deployed into qualifying activity on a timeline that satisfies the condition – not sitting on the balance sheet as reserve, and not funding something outside the qualifying trade.

Practically, that means your use of funds has to be specific: this much on engineering headcount, this much on go-to-market, over this period. A model showing an eighteen-month runway with generic burn doesn’t demonstrate the spend, and it’s a weaker document for both HMRC and your investors.

Our advance assurance service covers the eligibility side; the point here is that the spending plan and the model are the same document.

Timing of funds is a cash flow problem

SEIS and EIS rounds move slower than founders plan for. Advance assurance takes time. The round itself often closes in tranches as individual investors commit rather than in one event. Then the compliance paperwork that lets investors claim their relief comes after the shares are issued and the trading condition is met.

Your cash forecast needs to reflect that. Model the round as multiple receipts across a realistic window rather than one payment on a target date, and make sure the forecast still works if the last tranche is two months late.

The specific trap: committing to hires on the assumption the full round lands in one go. Offers accepted against money that arrives in stages is how a funded startup ends up tight in the month after it raised.

Order matters between the two schemes

If you intend to use both, SEIS shares generally need to be issued before EIS shares, and getting that sequence wrong can be expensive to unpick. There are also limits on how much can be raised under each and a time window running from when you started trading.

All of that belongs in the model as dated events rather than as a footnote, because the sequence determines what you can raise and when. SEIS vs EIS covers how founders choose between them.

How tax-relief investors read a model

An investor claiming SEIS relief is in a different risk position from a standard angel. The relief materially changes their downside, and loss relief changes it further – so the question they’re asking is less “how likely is this to fail” and more “what does the upside look like, and does the money get me to a milestone that supports the next round?”

That shapes what your model should emphasise. Show clearly what this specific round buys – which milestone, by when – rather than a smooth path to profitability three years out. A model showing SEIS money reaching a defined traction point that makes a seed round raisable is answering the actual question.

Show the runway the round buys as a date, with a downside case. And keep the cap table modelling honest: investors will want to see what their stake looks like after the next round’s dilution, which is where cap table structure before a first external raise becomes part of the conversation.

What to model before advance assurance

Advance assurance applications are stronger with a model behind them. Before you apply, you want: the amount you’re raising and from roughly whom; a use of funds showing qualifying activity with a timeline; a forecast demonstrating the trading activity the scheme requires; and a clear statement of what the company does, matching what the model spends money on.

That last point catches people out. Where the business description and the spending plan describe slightly different companies, it creates questions that are easier to avoid than to answer.

The takeaway

Model the round as tranches rather than one receipt, tie the use of funds to qualifying activity on a dated plan, sequence SEIS before EIS, and show what the money buys as a milestone rather than a runway. Here the model does double duty as a pitch document and as supporting evidence.

Raising under SEIS or EIS?

Disclaimer: This article is general in nature and does not constitute financial advice. SEIS and EIS rules, limits and conditions are detailed and change over time – speak with a qualified adviser (hey, that’s us!) about what applies to your situation.