Today, the government revealed plans for a new £250m ‘Future Fund’ to ensure that the UK’s start-up sector remains viable during the coronavirus pandemic.
The fund, which will be delivered by the British Business Bank, is designed to ensure that the country’s high growth companies will receive the right amount of investment to keep them afloat.
The Future Fund will provide government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors.
These convertible loans may be a suitable option for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme (CBILS).
Although the fund will officially begin in May, companies are preparing to apply on the GOV.UK website. A company is eligible to receive the funding if they are based in the UK; can attract the equivalent match funding from third party private investors and institutions; or the business has previously raised at least £250,000 in equity investment from third-party investors in the last five years.
Russ Shaw, founder of Tech London Advocates & Global Tech Advocates
“Despite trailing behind some of our European counterparts, the Future Fund is a vital lifeline that will give UK start-ups a sense of certainty in a turbulent economic period. The conversion of debt into equity will ensure that early stage businesses are not too debt laden and match funding with private investors is also an important ingredient.
“With the funds in place, this now becomes a process issue. We are losing start-ups every day and the British Business Bank has an opportunity to step up, address the question marks around its handling of CBILS and deliver urgently needed funding. The BBB must ensure that it is equipped to handle what is a crucial period for UK start-ups.
“Time is of the essence and although a scheme launched by May is very welcome, there are many early stage businesses that have more immediate needs. To complement the Future Fund, it’s crucial that the government also leans on existing schemes to address this. The Chancellor’s provision of £750m in Innovate UK grants is an excellent example of this in practice. More can be done though, such as expediting R&D tax credits or modifying EIS and VCT rules to enable investors to inject cash into startups now. This combination will go further to address the immediacy of the issue.”
Welcoming the Chancellor’s announcement of a Future Fund, supporting start-ups by delivering an initial commitment of £250m of new government funding which will be unlocked by private investment on a match funded basis, Business West Managing Director Phil Smith said: “The Future Fund will help provide urgently needed support for many of our most innovative and fast-growing businesses around the UK, as we have urged.
“The fund fills an important gap in existing government support and could make a real difference to entrepreneurial firms navigating challenging circumstances. It’s crucial that this enhanced support reaches companies in difficulty as quickly as possible.”