In a bid to help start-ups navigate through a tough economic period during COVID-19, the UK government has opened applications for its £250m co-investment ‘future fund’.
The move comes as Rishi Sunak continues to embark on significant measures in a bid to ease the overall economic impact caused by COVID-19. The latest set of measures seek to focus on some of the country’s most promising start-up companies.
The support is hoped to offer a welcomed boost to the thriving fintech sector, as it looks to deliver around £500m in total to smaller businesses, with half of that initially available at the scheme’s immediate launch.
Rishi Sunak, Chancellor of the Exchequer, said: “Our start-ups and innovative firms are one of our great economic strengths, and they will help spur our recovery from the pandemic.”
“The Future Fund will support firms across the UK to get through the pandemic by stimulating investment so that they can continue to break new ground in technology and innovation.”
The terms of the scheme, which allows UK-based companies to seek convertible loans of between £125,000 and £5m, mean that startups must have private investors waiting in the wings to match the amount being distributed.
By offering a convertible loan, the government will gain an equity stake in each company if the loan is not repaid.
It’s one of a string of economic measures that the government has implemented during the pandemic. However, this latest scheme will most likely cater to the fintech sector, having been designed for firms that are more likely to be reliant on equity investment.
It comes after the UK government received criticism for the speed in which it has supported tech firms when compared to other European countries such as France and Germany. These latest set of measures have been praised by many as a welcome, but late, relief.
Dom Hallas, executive director of Coadec, a trade group representing UK tech start-ups commented: “We’re pleased that the fund is nearly ready to go. Obviously it would have helped to have EIS investments included but the proof of success will now be in the uptake to the scheme and how quickly the BBB can distribute capital to start-ups who see their runway shortening every day.”