The government has announced a £1.25 bn package to support innovative new companies that are not eligible for existing coronavirus rescue schemes.
It will match up to £250m of private investment and add £550m to an existing loan and grant scheme for smaller firms that focus on research and development. Adding it up, that totals £800m of new money to support fledgling firms.
Chancellor Rishi Sunak said start-ups would help power the UK’s growth after the coronavirus crisis.
“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,” he said.
Newly-founded companies often lose money in their early years, which makes them ineligible for the government’s emergency loan scheme. But it also makes them a risky investment.
It took some of the world’s most well known and valuable firms – including Amazon and Tesla – years to turn a profit. Uber is yet to make any profit at all.
However, the government is keen to ensure that the economic impact of the coronovirus does not kill off some of the UK’s fastest growing and most innovative companies.
Nevertheless, the rescue package comes with strings attached. To qualify to receive the government money, a company must have raised £250,000 privately in the last five years.
On top of that, any money put in by the government must be matched by private investors. And, if the money is not repaid, the government will take an ownership stake in the company.
The package has been broadly welcomed by the entrepreneur community but some have warned that – as with other coronavirus support mechanisms – complexity is the enemy of speed. And it’s speed that is all important.
Source: bbc.com
