UK government announces £1bn support package for startups

The Future Fund will issue convertible loans from £125,000 to £5 million

The UK government has announced a billion-pound support package for small and medium-sized businesses focusing on research and development.

The package, which includes a new £500 million loan scheme and £750 million of targeted support, will come as a lifeline to small and newly-founded companies that are not eligible for the Coronavirus Business Interruption Loan Scheme.

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Startups are rarely profitable, which makes them ineligible for the government's emergency loan scheme. 

The Future Fund will issue convertible loans of between £125,000 and £5 million to UK-based businesses that have managed to raise at least £250,000 in equity investment from third-party investors in the last five years.

Applicants should be aware that any money provided by the government via the Future Fund must be matched by private investors. Moreover, businesses which fail to repay the loan will have their ownership stake taken over by the government.

Chancellor Rishi Sunak described startups and R&D businesses as “one of our great economic strengths” which “will help power our growth out of the coronavirus crisis”.

"This new, world-leading fund will mean they can access the capital they need at this difficult time, ensuring dynamic, fast-growing firms across all sectors will be able to continue to create new ideas and spread prosperity," he said.

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Tech Nation chief executive Gerard Grech said that the government's next priority should be focusing on ways to target the money effectively.

“Startups and scale-ups vary in their financial structuring and their regional location. It will be important to get the balance just right, across the UK and also across the different models of investments, from angel invested companies to VC-funded firms,” he said.

“The UK’s tech sector has achieved a huge amount in the past 10 years. In 2019, a staggering 33% of all European tech investment was in the UK - the third highest in the world. We must keep building on this success story.”

The Future Fund is set to launch in May 2020. Further details on how to apply will be published in due course.

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