UK government to take equity in struggling startups with £250m 'Future fund'
- Reference: 1587362289
- News link: https://www.theregister.co.uk/2020/04/20/uk_government_unveils_future_fund_for_startups/
- Source link:
The plan, announced on Monday by the Chancellor of the Exchequer Rishi Sunak, will see the government create a "Future fund" of £250m delivered in partnership with the British Business Bank.
The scheme will open in May and run until the end of September. UK-registered companies that have raised at least £250,000 in equity investment the last five years will be eligible to receive loans of £125,000 to £5 million, provided they can find matching private investment.
The funding is labelled "bridge funding" to help startups keep going in the COVID-crushed economy.
Which sounds great. But there's plenty of devil in the details on this one, as the scheme's [1]headline terms [PDF] explain that the government wants its pound of flesh.
Interest on the loans will be at least eight per cent, payable at the end of a three-year term.
There's also a provision for the bridging finance to automatically convert into shares if a borrower manages to secure funding equal to the government loan.
Startups have and have called for the government to extend their support to the sector during the coronavirus crisis.
Earlier this month, several of the UK's biggest startups, including Deliveroo, Darktrace, Improbable, [2]wrote to Sunak urging the government to extend its relief measures to startups.
Further assistance will flow in the form of £750m of grants and loans from Innovate UK, the nation's business-facing arm of government research and development support. The majority of the funds will be available to the agency's 2,500 existing customers. The first payments will be made in mid-May.
“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 in a press briefing on Monday.
“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 UK has followed similar moves by France and Germany to prop up their startups. The French government unveiled a €4bn package to support its local startups in March, and earlier this month Germany pledged €2bn to help its startups weather the crisis. ®
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[1] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/880119/Convertible_Loan_Key_Terms_-__Final_Version_.pdf
[2] https://www.scribd.com/document/455681169/Letter-to-the-Chancellor
[3] https://go.theregister.co.uk/tl/1936/-8552/how-to-accelerate-brilliant-digital-experiences-with-low-code?td=wptl1936
Re: 8%!?
Exactly!
This is not very supportive when its at 8% and only over three years.
Re: 8%!?
Agreed. Loans for the housing market are at around 2%. I don't see anyone applying for this, banks can already offer a better deal.
Re: 8%!?
But look. Look!! They're doing something to help startups. Just don't look behind the curtain, there's nothing interesting there. Nosiree.
Ignore that anyone would need to be mad and desperate to take those terms.
Ignore the Chancellor knowing that full well.
As with all this government's promises around COVID-19 (e.g. see the PPE promises) this is all about appearances, not about being actually helpful. Helping costs money. Lip service is free.
Re: 8%!?
Housing market loans are secured against the house, so much less risky.
For my business, I'm regularly offered loans at less than 1%. Small print is that the directors are giving a personal guarantee - that means my house is on the line.
Car loans for £20k are easily available at 4% (ish) as the monthly repayments are nice and low and tend to be repaid.
The 8% is for a risky startup - I'd want more than that if I was lending money to a startup. Wouldn't you?
Re: 8%!?
Startups are risky by their very nature.
However that is still 1% less than the Ford Motor Company (USA) borrowed at last week.
I don't think that is bad then. Mind you Ford is a dead man walking these days so perhaps 8% is a bit OTT.
Can I get a mere £1M?
I promise to put it to good use, help improve the economy, and do my part to ease the strain of the current crisis.
(I'll blow it all on blackjack, beer, & hookers!)
*Holds hand out in hopeful expectation*
Re: Can I get a mere £1M?
" ... I'll blow it all on blackjack, beer, & hookers! ... "
I like that business plan, but I suspect that your application will be unsuccessful as you're neither a multinational nor a major charity.
WTF! You call that a plan?
The UK government will throw £1.25bn at startups and R&D firms that are struggling to survive in the coronavirus lockdown and are willing to pay well-above-market interest rates and give away equity in exchange for a fiscal lifeline. The plan, announced on Monday by the Chancellor of the Exchequer Rishi Sunak,...
How the fcuk have y'all arrived at the stage where you listen to such incompetent parasites, expecting them to lead anyone with anything to greener fields? And are you the bigger idiot so easily fooled that they are relying on to survive and prosper, for they are not really struggling, are they, other than failing to energise a viable novel future narrative ?
And don't answer that if you are easily depressed because you expected the future to be different and better rather than worse and similar with more of the same old guff presented daily in missing news briefings.
Dick Turpin at least wore a mask before he robbed folk of their valuables.
And of course Collective Cabinet Responsibility paints the bigger picture targets for prime attention? Way to go, Boris ..... it's all downhill quickly from here if things are not fundamentally changed from pathetic to seismic.
Re: WTF! You call that a plan?
I think you'll find that the "greener fields" are currently closed to enforce social-distancing.
Re: WTF! You call that a plan?
Not at all. In another totally not-contraditory edict from gov, UK parks must remain open even though no one's allowed to gather in them.
Re: UK parks must remain open
Unless you are in Middleborough then.
https://www.bbc.co.uk/news/uk-england-tees-52345266
Re: UK parks must remain open
The downsides of rural life: Broadband so shitty that even on the lowest settings video chat constantly freezes.
The upside if rural life: A 10 mile walk and only passed 10 people. 2m distancing, pah, try 2km.
Did I read right?
Deliveroo are wanting bailouts?
A home delivery company needs a hand out when everyone is stuck at own?
There is a company doomed to fail.
Next news, Amazon pay 5p tax, because we're Covid, yes Covid.
8%!?
Wow. Typical rates for unsecured loans are supposedly around 4-6% unless I'm reading the tea leaves wrong.
Is Sunak selling bonds in this scheme, and who to? Feels like somebody must be hoping to make a mint...