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Coronavirus (COVID-19): Support from the Government for start-up businesses

24/04/2020

On the evening of Monday 20 April 2020, the Chancellor of the Exchequer announced the government’s £1.25bn package to support start-up businesses across the U.K which are facing financing difficulties.

With the government looking at start-up businesses with innovative research as crucial to the recovery of the UK economy, the Chancellor announced two initiatives designed to support start-ups who are ineligible for the other government-backed loans due to their early-stage profitability.

Commercial associate solicitor, Shaun Guppy, and trainee solicitor Zaeem Mughal look at how this support is intended to assist start-up businesses.

The Future Fund for start-up businesses

The first of this two-part package is a co-investment fund labelled the ‘Future Fund’. The fund will make up to £500 million available to start-ups. The government has pledged £250 million, and the private sector will make up the remaining half.

The Future Fund will launch in May 2020 and will be open until the end of September 2020.

The fund will provide eligible start-ups between £125,000 and £5 million, in the form of convertible loans, as long as the funding is at least matched by private investors. These loans will convert into an equity stake – at a discounted rate – in the company if the money is not repaid.

To be eligible, your business:

  • must be a UK registered private company;
  • attract funding from private investors to at least match the government loan; and
  • have previously raised at least £250,000 from private investment in the last five years.

For further information relating to the Future Fund, please visit: https://www.gov.uk/guidance/future-fund.

Research and Development Rescue Package

The second part of the rescue package is targeted at small-to-medium enterprises that focus on research and development.

£750 million will be available through Innovate UK’s existing grants and loan scheme. The majority of the fund will be available to Innovate UK’s 2500 existing customers. 1,200 companies not currently part of Innovate UK will also receive funding.

The first of these payments will be made by mid-May.

Is this encouraging news for start-up businesses?

Pressure had been growing in recent weeks for the government to give support to the UK’s start-up sector.

Although some critics raised concerns that funding should be used on companies that are more likely to succeed, the initial news has been met with positivity. However, as with other government-backed schemes, any opinion will be reserved until the scheme is implemented and the speed at which it is delivered.

*The information set out in this article is correct at the date of publication (24 April, 2020). The effect of coronavirus on businesses is a fast-changing area and so it is important to obtain legal advice to ensure you are properly protected.

Contact us

If you have any questions regarding the impact of the Coronavirus upon your business or are seeking up-to-date legal advice on Company & Commercial matters, contact Shaun Guppy on 01202 294 566 or email ShaunGuppy@steeleraymond.co.uk.   

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