Government announce scheme worth £1.25bn to help start-ups
This new scheme is for start-up businesses that do not qualify for any of the other COVID-19 business support schemes. Chancellor Rishi Sunak said this would help start-ups through this difficult period plus it would boost the growth of UK’s economy once the coronavirus pandemic crisis has subsided. Many start-up businesses lose money in their first few years of trading meaning they cannot apply for Coronavirus Business Interruption Loan Scheme. The Government want to make sure that the coronavirus pandemic does not sink the UK’s fast growing innovative businesses – which are deemed riskier investments that do not lend easily to bank funding criteria.
Are there strings attached?
Yes – there are strings attached, firstly, to be eligible for government investment your company must have raised private funds of at least £250,000 in the last five years. Secondly, any investment made by the government must be matched by private investors.
It should also be noted that if the government is not repaid then they will take an ownership stake in your company. The entrepreneur community has generally accepted this scheme and this is welcomed support. However, there are concerns over the complexity of the scheme which could catch out businesses looking for quick investment – something that is apparent in many other support schemes outlined to date.
Coronavirus Business Interruption Loan Scheme
Pressure is now being put on the government to increase the loan guarantee from 80% to 100% on the Coronavirus Business Interruption Loan Scheme. The main reason for this is that just over £1bn of government-backed loans have been approved out £330bn total support package. Many firms have said that banks have not approved their loan due to banks being left to cover 20% of the losses if the loan cannot be repaid, with the banks wanting sufficient recourse and/or headroom in the event of the business failing. It is hoped that the increase in government guarantee increasing to 100% will remove some of the barriers being faced by businesses during the application process.
How can we help
At Hawsons we have a dedicated team of accountants at our offices in Sheffield, Doncaster, and Northampton. Our expert accountants can advise you which coronavirus support schemes would be best for your business.
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