The government has unveiled £1.25 billion in new support for the UK’s start-ups.
A £500m ‘Future Fund’ and £750m to support R&D are intended to help prop up new companies which are ineligible for existing coronavirus rescue schemes.
The move comes after the tech sector called for measures to be introduced to safeguard the future of businesses which are in the early stages of growth and being hit hard by lockdown measures.
French SMEs were earlier given access to a €4bn fund while German start-ups can access a similar €2bn pot.
Chancellor Rishi Sunak said the support would help start-ups power economic growth after the coronavirus crisis.
“Our start-ups and businesses driving research and development are one of our great economic strengths, and will help power our growth out of the coronavirus crisis,” Sunak said.
“This new, world-leading fund will mean they can access the capital they need at this difficult time, ensuring dynamic, fast-growing firms across all sectors will be able to continue to create new ideas and spread prosperity.”
The ‘Future Fund’ loan scheme is aimed at high-growth early stage companies and set to run from May to September. The government will commit an initial £250m with the private sector set to contribute the other £250m.
Companies can apply for loans of £125,000 to £5m. To qualify, they must have raised £250,000 privately in the last five years. Any contributed government money must be matched by private investors.
If the money is not repaid, the loans will automatically convert to equity in a start-up’s next funding round.
The other £750m pot is for SMEs focusing on research and development and will be issued as loans and grants by innovation agency Innovate UK.
The first payments are expected to be made in mid-May.
Following the announcement of the government’s initial £330bn support package, only £1bn in loans have been approved by banks as the government only guarantees them up to 80%.
There have been calls to increase this to 100% to convince banks to approve more loans.