The loan scheme aims to protect the UK’s fast-growing innovative tech and life science firms
Businesses are desperately trying to stay afloat amid the coronavirus outbreak and inevitable economic slowdown. Now, the government has taken a life-saving initiative to help support technology and life sciences firms so they can continue developing innovative products. The Chancellor has announced a £1.25 billion rescue package for UK’s tech and life-sciences industry start-ups during this detrimental time and spearhead Britain’s growth for the future.
On Monday, Chancellor of the Exchequer Rishi Sunak announced the £1.25 billion package which will include a £500 million “Future Fund” loan scheme for high growth start-ups impacted by coronavirus. Managed by the British Business Bank, the Future Fund scheme will run from May to September providing UK-based companies with between £125,000 and £5 million from the government, and the other half will be matched by the private sector on a deal-by-deal basis. SMEs focusing on research and development will benefit from £750 million in grants and loans. Start-ups applying to the Future Fund will need to have raised £250,000 from private backers within the past five years to qualify, according to a Treasury statement on Sunday. The Treasury has yet to publish all the eligibility criteria. The funding will be available through the UK’s innovation agency, Innovate UK and first payments will be made by mid-May.
This comes as start-ups across the UK urged the government to provide more financial support after trailing behind its European counterparts. In March, France provided business access to over 4 billion euros in funding to help them through coronavirus while Germany pledged 2 billion euros to help local start-ups. Many young UK-based tech firms were unable to access emergency funds in earlier government schemes, as many failed to meet the criteria for applying as they were unable to show consistent profits due to large investments early on in their business.
Russ Shaw, founder of Tech London Advocates & Global Tech Advocates has insisted the British Business Bank must act quickly to help start-ups survive during this detrimental time, as thousands will have to wait weeks before being granted access to the Future Fund scheme. “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,” Mr Shaw said. “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.
He added: “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 start-ups now. This combination will go further to address the immediacy of the issue.”
With new schemes in place, the government is now stepping up its efforts to help start-ups during this difficult time. However, businesses will only be able to access funding about a month which could put a strain on operations, leaving many swimming towards the edge over the next few weeks.