The government has announced a £1.25bn package to support innovative new companies that are not eligible for existing coronavirus rescue schemes.
It will match up to £250m of private investment and add £550m to an existing loan and grant scheme for smaller firms that focus on research and development. Adding it up, that totals £800m of new money to support fledgling firms.
Chancellor Rishi Sunak said start-ups would help power the UK’s growth after the coronavirus crisis.
Following lobbying led by Dom Hallas, Executive Director, Coadec the Government is announcing that a vital lifeline for venture-backed startups up and down the country has been secured. A consortium led by Coadec has been calling for an equity-based financing solution since day one.
There will be two new strands to the Government startup support
• A new ‘Future Fund’ will invest between £125,000 and £5 million in qualifying startups (This scheme will launch in May 2020)
• An extra £750 million for Innovate UK to provide liquidity through grants and loans.
Under the new Future Fund startups will be able to access cash through a new convertible loan programme from the British Business Bank. By allowing startups to access loans by converting debt into equity if they are not repaid, the Future Fund will allow venture-backed businesses to access a pot of £500 million in liquidity.
To be eligible, your business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third party investors in the last five years.
The Government will match private investment on a 1:1 basis up to a maximum of £5 million, and a minimum of £125,000. We are now working with the Government and the British Business Bank to ensure the scheme is open to the widest possible amount of investors, and that the delivery mechanism functions effectively.
In addition, using Innovate UK and other funding vehicles to push support to startups was another of the Save Our Start ups (SOS) key asks, and now the Government has allocated Innovate UK £750 million to provide additional liquidity.
This includes £550million of new funding to support R&D activity, and £175,000 of support will be offered to startups who do not currently receive Innovate UK funding. Importantly, £200million of grant and loan payments will be accelerated to existing Innovate UK customers on an opt-in basis. The Treasury has also committed HMRC to speed up the payment of tax credits.
Details can be found on the Treasury website here.