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Government Announces £1.25bn in Loans to Support Innovation and Entrepreneurship22nd April 2020 Corporate
On Monday evening, Rishi Sunak announced £1.25billion in taxpayer-backed loans to support businesses suffering financial difficulties as a result of the COVID-19 pandemic. It is intended that the funding will enable eligible businesses to continue to develop and help power future economic growth.
The funding is split into two categories: the Future Fund and targeted support for SMEs and is aimed to provide a suitable alternative for companies who cannot access the other government backed schemes.
The £500million Future Fund scheme will launch in May 2020 and is available to high growth, UK based companies in their early stages of business. The scheme will provide convertible loans of between £125,000 and £5million.
In order to access the scheme, any funding to be provided from the government must be matched by private investment and the company must have raised £250,000 in private investment in the last 5 years.
It is important to take note that if the loan is not repaid within three years, the government will take an ownership stake in the company.
The government is expected to announce full details of the eligibility criteria in the very near future.
£750million targeted support for SMEs
Small and medium enterprises focused on research and development who receive funding from Innovate UK’s grants and loan scheme. Innovate will accelerate up to £200million of grant and loan payments on an opt-in basis. An additional £550million of funding will be provided to increase support for Innovate’s existing 2,500 customers.
For companies who are not currently in receipt of Innovate funding, £175,000 of support will be available.
The first payments under this funding scheme are expected to be made by mid-May.
Whilst this may be seen as welcome news for businesses who are not able to access the Coronavirus Business Loan Scheme, it will be crucial to understand how the newly announced schemes are to be executed, particularly if the government were to exercise their right to take equity and how that equity will be valued. We will provide a further update when the government publish their full guidance.