20 April 2020

Future Fund: Government announces further support for innovation

Written By FinTech Alliance

Future Fund: Government announces further support for innovation

This week the government unveiled plans for the Future Fund which aims to protect innovative startups, said to be worth £1.25bn.  

In an announcement on Monday, Chancellor Rishi Sunak outlined that £500mn (£250mn offered by Government in match funding) has been committed to ensure ‘high growth’ companies across the UK get enough investment to remain viable during the Coronavirus crisis.

Businesses that secure an equal or greater amount of match funding from private investors will be able to unlock investment of between £125,000 and £5mn through the British Business Bank. This will be offered as a convertible loan, meaning it can be converted into equity at a later date.

To be eligible, firms must be registered as a private company in the UK, and have previously raised at least £250,000 in private investment in the last five years.

Though said to be worth £500mn, in fact £250mn has been committed by the government and the remaining £250 will come from private investors. The scale of funding available will remain “under review”. The scheme launches officially in May 2020 and applications are currently open until the end of September, but this will also be reviewed as the crisis develops.

In addition, £750mn has been made available via grants and loans for those SMEs focusing on research and development. This will be made available through Innovate UK which will accelerate up to £200mn of grant and loan payments, but only for its existing customers. The remaining £550mn will also be made available, again only to existing customers, while £175,000 will be offered to around 1,200 firms ‘not currently in receipt of UK funding’.

This is part of the government’s aim to fill a gap in the market for startups that are not receiving financing support. Those startups that can show they have grown at pace over the past few years, and therefore will be of benefit to the economy post-crisis, will benefit from the Future Fund but must look at how this will work with their current pool of investors.

So far, the government has announced support for SMEs through its Coronavirus Business Interruption Loan Scheme – a pledge to provide up to £5mn for businesses again through the British Business Bank for businesses with a turnover of up £45mn. However, most banks are offering finance at a minimum of £25,000 with RBS one of the only major banks to offer smaller loans. As a result, the bank had last week been responsible for around 70% of lending – and just 2,500 had been approved of the UK’s six million SMEs.

The support announced this week will certainly help to tide businesses over in the hopes that innovative sectors like FinTech will survive and be able to support the UK long after the crisis is over. However, there will be many smaller businesses that do not meet investment criteria or require loans smaller than those available from major banks through CBILS – and perhaps involving FinTech could be the answer here.

Take a look at our Covid-19 resource here to find out about support available to your business.

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