On Monday, 20 April, Chancellor Rishi Sunak announced a new £1.25bn package to protect the UK’s most ‘innovative firms’ during the Coronavirus pandemic, including the Future Fund.
The measures are aimed at protecting businesses ranging from technology to life sciences, helping them to get through the Covid-19 crisis and continue to play a part in the UK’s future economic success.
Details on the Future Fund are on the Government’s website here.
What is the support package announced by Rishi Sunak to protect ‘innovative firms’ hit by coronavirus?
There are two parts to the package:
- The Future Fund is a new £500m convertible loan scheme for high-growth firms; and
- The Government is also announcing £750m of targeted support for SMEs whose focus is on research and development via Innovate UK.
What more do we know about the Government’s Future Fund?
The details remain to be announced in full by Treasury, but so far, we know that the fund:
- will be delivered in partnership with the British Business Bank;
- will be launched in May;
- will provide UK-based companies with between £125,000 and £5m of convertible government loans, subject to at least equal match funding from private investors;
- may be a suitable option for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme; and
- insists that the bridge funding is used solely for working capital purposes and not to repay any borrowings, make any dividends or bonus payments to staff, management, shareholders or consultants or, in respect of the Government loan, pay any advisory or placement fees or bonuses to external advisers.
Is my business eligible to access the Future Fund?
Whilst full criteria are yet to be published, we do know that your business:
- needs to be based in the UK;
- must be able to attract the equivalent matched funding from third party private investors and institutions; and
- must have been able to previously raise at least £250,000 in equity investment from third-party investors in the last five years.
The maximum term of the loan is set at 36 months. The other headline terms of the Future Fund are here.
Thoughts from Bellevue Law on the Government’s new package to help technology and research companies
Florence Brocklesby, founder of Bellevue Law says of the Future Fund:
“This move will be cautiously welcomed by tech companies and their investors. These businesses are a really crucial part of the British economy and its future success, but very few will have been able to access support from the previously announced Coronavirus loan schemes.”
“One challenge of the existing loan scheme is that banks are unwilling to lend to businesses which can’t show prior profitability, even with a Government guarantee to the tune of 80% of the loan. By definition, young and fast-growing tech and R&D heavy companies often can’t show a track record of profit, even if they are highly innovative and likely to succeed in the medium term.”
“Tech start-ups usually take funding from investors such as venture capital funds instead, but the pandemic has made many investors more cautious, and we’ve seen deals pulled or delayed.”
“This bespoke funding may provide much-needed support for tech companies. These businesses don’t tend to have funds in the bank to cover several months of cashflow, so for some even waiting until May will be too long, but we hope that for many the promise of funding will provide much-needed confidence.”