News & Blog

Government support for vital start-up community welcomed

4th May 2020

Last week the UK Treasury offered welcome support to help the start-up and early stage community. Businesses in this sector are largely excluded from many of the previous UK Treasury support mechanisms as they would not have had the requisite trading history.

The start-up and early stage community is vital to kick starting growth and a return to prosperity following the Covid-19 crisis and so the announcement is “very welcome news” says Alastair Smith, Senior Associate in our Corporate & Technology team.  

As with all the packages available, much of the detail is still to be released and if it is to be a success then funds need to be delivered in an expedient manner to ensure business survival. In total the numbers are big with £1bn being pledged as the initial rescue package from the UK Treasury. In addition, the Scottish Government has also announced support for SME businesses to the tune of £100m.  

There are 2 parts to the UK Treasury package with the first being £750m of funding for Innovate UK to provide grants and loans. The bulk of this will be to companies that have existing Innovate UK funding but up to c.£200m will be for new applicants whose businesses focus on research and development.  

The second part of the UK Treasury funding is £250m called the Future Fund (to be matched by a further £250m from the private sector) to be administered by the British Business Bank. This will invest between £125k and £5m in high growth UK companies.

In most cases from the guidance issued to date this will take the form of convertible loan notes with the following main eligibility criteria (although more detailed guidance will be made available):-

a. The company must have raised at least £250k in equity funding from investors in the preceding 5 years;

b. 50:50 matched investment with the private sector (i.e. so companies will still need to raise funds from private investors to access the Future Fund);

c. The company must not be listed and must be registered in the UK;

Effectively, the UK Treasury is providing a matched investment fund for investor backed companies that have investors that are willing to stump up more funds at this time on the same or similar terms to the UK Treasury.

Finally, the Scottish Government has in the past few days announced an additional £100m fund for SME businesses based in Scotland that have fallen through the net of UK Treasury funding.

If your business could benefit from these support packages, you should speak to legal and financial advisors experienced in advising high growth and scaling businesses in relation to their fundraising needs and who will be able to provide advice on the support offered through government schemes and on completing such investments.

For further information, you can contact:

Alastair Smith, Senior Associate in Corporate & Technology, Lindsays

Alastairsmith@lindsays.co.uk

0131 656 5633