The UK government is poised to come to the rescue of the British venture-backed startups striving for cash during the coronavirus pandemic. The UK government has apparently revealed plans for a new Future Fund meant to boost high-growth companies, especially startups and help them remain viable during the pandemic.
The rescue plan, revealed by Rishi Sunak, the UK chancellor of the Exchequer, came up with the Future Fund loan scheme, slated to run from May through September committing an initial £250 mn. In a bid to be eligible for a Future Fund loan, start-ups are expected to raise at least £250,000 from investors in the last half-a-decade.
The scheme will see the UK government acquiring stakes in a slew of the UK’s nascent-stage startups.
The loans are likely to automatically convert to equity in the next funding round if the debt has not been repaid. There is also a speculation that the U.K. taxpayer would have had to face the brunt had repayment option been available. Experts say the best in the house would prefer repaying the loan; while, the worst performing companies would prefer converting to equity.
It is worth noting that non-listed U.K. start-ups will be entitled to loans ranging from £125,000 to £5 million. Reportedly, scale of funds may be kept under review as more money could be injected in the ensuing period.
The UK government has also unveiled £750 million funding tranche for small- and medium-sized firms focused on research and development. Sources indicate that the UK innovation agency Innovate UK will issue it as loans and grants. The first payments are expected to be made in mid-May.
While £550 million will be made available to underpin support for the existing customers, £200 million of the grants and loans payments would be for its 2,500 existing customers on an opt-in basis.