Chancellor Rishi Sunak/HM Treasury
Future Fund officially opens applications for startups hit by COVID-19
The Future Fund will match loans up to 100 per cent provided by private investors to the value of £5m.
The UK government has today launched its strategy to help cash-strapped startups dubbed ‘The Future Fund’—with convertible loans from £125,000 up to £5m.
Since the start of the coronavirus crisis, the government has introduced a series of loan schemes to help get the UK’s businesses back on their feet and to-date over £22bn has been dished out through these schemes.
But what exactly is this new scheme opening today?
‘The Future Fund’
Last month Chancellor Rishi Sunak announced the Future Fund for businesses that have not been able to access other government-backed initiatives, such as the Coronavirus Business Interruption Loan Scheme (CBILS) or Bounce Back Loans (BBL).
The Future Fund plans to deliver up to £500m of new funding to SMEs with applications opening today, with an initial £250m available today and the rest available if needed.
Loans provided under the scheme will range from £125,000 to £5m and, specifically, The Future Fund is designed to match capital already being invested by VCs or angel investors.
To be eligible for the scheme, firms must have raised at least £250,000 in equity investment from outside investors in the last five years, and it is up to the investors to apply for the funds as opposed to the businesses.
The loans carry a minimum 8 per cent interest rate which is not payable on a monthly rate, rather it is accrued over the length of the loan and will either be repaid or converted into equity.
The scheme will be open until September and applications have officially opened this morning (20 May 2020). You can find all details on how investors can apply here.
How will this help fintech?
It’s no secret that the Bounce Back Loan (BBL) scheme, which is focussed on smaller businesses, has been much more successful than the initial CBILS programme and its hoped that the Future Fund will further plug the gap that more and more fintechs find themselves falling in.
The Future Fund is designed for companies that often rely on equity investment and are unable to access other government-backed support schemes, something which many fintechs have been acutely aware of.
The government has often been criticised by industry voices for not giving fintechs both the ability to lend or giving them enough capacity once they become accredited—despite only being accredited on Friday, Tide is already nearing its limit and is waiting for a higher limit to be approved.
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.”
For the sake of our startups, let’s hope the Future Fund delivers on this.