The UK government announced up to £1bn ($1.25bn) in support for innovative companies affected by the Covid-19 pandemic today.
The government is putting up £250m for an initiative called the Future Fund, which will offer convertible debt financing to domestic startups affected by the Covid-19 pandemic.
Future Fund will provide loans sized between £125,000 and £5m to UK-based companies in partnership with the state-owned British Business Bank, in the form of co-investment, matching capital supplied by private investors to make £500m theoretically available. It is set to launch next month.
The loans have a 36-month maturity period and will comprise unsecured bridge funding that will be converted to an equity stake in the recipients’ next equity round, with a minimum conversion discount of 20%.
Companies will have needed to have raised at least £250,000 in the past five years and have a ‘substantive’ economic base in the UK to qualify for Future Fund loans.
An additional £750m has been made available in the form of grants and loans to research and development-focused small and medium-sized enterprises through government agency Innovate UK.
The £750m comprises up to £200m in existing grants and loans that can be accelerated by their recipients should they choose, in addition to £550m available to support existing customers.
Rishi Sunak, the UK’s chancellor of the exchequer said: “Britain is a global leader when it comes to innovation. Our startups and businesses driving research and development are one of our great economic strengths and will help power our growth out of 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.”
