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The U.K. Government has announced a £1.25 billion funding package for high-growth businesses driving innovation and development in the U.K. The package will be launched in May, with some payments expected to be made by mid-May. It is the latest in a series of measures by the U.K. Government to protect businesses in the wake of COVID-19.[1] In March, the Government announced the Coronavirus Business Interruption Loan Scheme, entitling small and medium-sized businesses to access loans of up to £5 million. Separate funding schemes have been made available for large businesses, in the form of the Coronavirus Large Business Interruption Loan Scheme and the COVID-19 Corporate Financing Facility. The table in Annex I provides an overview of some of the funding schemes announced by the Government to date.
The £1.25 billion innovative business fund will be comprised of two packages:
The Future Fund will be delivered in partnership with the British Business Bank and private investors. To qualify, firms must be unlisted U.K.-registered companies and have raised at least £250,000 in equity investment from third party investors in the past five years.
The Government will provide between £125,000 and £5 million in loans to eligible firms. The Government’s commitments must be matched by private investors. The loans will convert into equity if they are not repaid, or upon the company’s next funding round. The scheme will initially be open until September, with the Government’s initial £250 million of committed funding subject to ongoing review.
The £750 million fund will be provided through Innovate UK, the U.K.’s innovation agency. Innovate UK is a public body that operates independently of the Government to invest in firms driving science and technology innovations likely to boost the U.K. economy. Under the scheme, up to £200 million will be made available to accelerate grant and loan payments to Innovate UK’s 2,500 existing customers, on an opt-in basis. A further £550 million will be available for existing customers by way of additional support. £175,000 of financial support will be offered to 1,200 firms who do not currently receive Innovate UK funding.
The announcement of the £1.25 billion package has been well-received by industry, including representatives of the FinTech sector, who believe that financial innovation will be key in helping the U.K. economy recover when it emerges from the COVID-19 pandemic.
TABLE OF U.K. GOVERNMENT COVID-19 FUNDING SCHEMES FOR SMES AND LARGE BUSINESSES[2] |
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FACILITY |
LENDER/PURCHASER, GUARANTOR, FUNDER |
PURPOSE |
ELIGIBLE ISSUER/BORROWER/FINANCIAL INSTITUTION |
ELIGIBLE ASSET/COLLATERAL |
Innovative business fund (Part 1): £500m Future Fund |
Lender: U.K. Government and private investors |
U.K. Government will provide loans of between £125,000–£5m (matched by private investors) to U.K.-based high-growth companies |
Borrowers: U.K. registered unlisted companies that have raised at least £250,000 in equity investment in the past five years[3] |
TBC |
Innovative business fund (Part 2): £750m Innovate UK fund |
Lender/Funder: Innovate UK |
Innovate UK will make up to £750m available in grants and loans to UK Innovate customers and up to 1,200 non-customer innovative firms |
Borrowers: existing customers of Innovate UK and up to 1,200 non-customer innovative firms[3] |
TBC |
Coronavirus Business Interruption Loan Scheme |
Lender: Accredited lenders of British Business Bank
Guarantor: U.K. Government |
Accredited lenders will provide up to £5m in term loans, overdrafts, invoice or asset finance to SMEs |
Borrowers: U.K.-based SMEs with an annual turnover of up to £45m |
Insufficient security not a condition to access scheme
Lenders cannot demand personal guarantees for facilities under £250,000
Personal guarantees may still be required for loans above £250,000 |
Coronavirus Large Business Interruption Loan Scheme |
Lender: Accredited lenders of British Business Bank
Guarantor: U.K. Government |
Accredited lenders will provide between £25m–£50m in term loans, overdrafts, invoice or asset finance to larger businesses with annual turnover of between £45m–£500m |
Borrowers: Businesses with annual turnover of between £45m–£500m |
No personal guarantees are permitted for facilities under £250,000
Personal guarantees may be given for facilities of £250,000 and over but claims cannot exceed 20% of losses after all other recoveries have been applied |
COVID-19 Corporate Financing Facility |
Purchaser: Bank of England
Guarantor: Required if issuer is not group’s primary entity and is not investment-grade |
BOE will purchase commercial paper from eligible companies to provide bridging support to companies experiencing funding difficulties |
Issuer: Companies (typically investment grade) that make a material contribution to the U.K. economy
Not available to banks, building societies, leveraged investment vehicles/groups predominantly active in business subject to financial regulation |
Asset: Commercial paper issued by eligible companies |
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