On the road to recovery: The UK Government continues to provide financial lifelines to UK businesses following the Budget announcement
This article was written by Robert Chidley and Amelia Tew
On Tuesday, included in his business-focused Budget, Chancellor Rishi Sunak announced two further funding schemes based on the CBILS and Future Fund, to provide much needed cashflow to UK businesses restarting after COVID.
Recovery Loan Scheme
This government-backed loan scheme will replace the existing CBILS, CLBILS and BBLS schemes due to end on 31 March. The Recovery Loan Scheme, which launches on 6 April, will allow businesses to borrow between £25,001 to £10 million (from £1,000 for asset and invoice finance) for any business purpose. Businesses will have the freedom to use the loan however they wish, whether it be for managing current cash flow or for growth and investment. Terms loans and assets finance will have a term of up to 6 years, whereas overdraft and invoice finance will be up to 3 years.
There is no eligibility criteria for minimum turnover and the scheme is open to both businesses who took advantage of the previous COVID-relief schemes as well as new applicants. However, in a change from previous schemes, businesses will have to meet interest payments and any associated fees straight away, rather than the existing 12 month respite-period.
Future Fund: Breakthrough
The pandemic saw a significant decrease in the amount of investors keen to invest in UK based companies. The Future Fund: Breakthrough aims to encourage confidence amongst private investors in UK businesses. Although details are light, the basis of the Future Fund: Breakthrough is similar to that of the Future Fund, in that that the government matches investment into a UK company by private investors. This additional cash injection will be key in helping cash intensive tech businesses survive the restart after COVID-19.
The Future Fund: Breakthrough is aimed at companies seeking a minimum total investment of £20 million and although companies are not precluded from applying due the fact they were a part of the previous Future Fund, this requirement will reduce the usage of the Future Fund: Breakthrough to larger, later stage businesses.
In addition, it hopes to prevent larger international companies taking over successful UK based businesses, simply because they cannot find the capital ‘locally’. For businesses to be eligible they must be UK based and have ‘significant UK operations’. The Financial Times has reported the fund is keen to focus on companies within the life sciences, quantum technology and clean tech industries.
Conclusion
Both schemes go some way in starting the journey to long term recovery and prosperity for UK businesses and the economy. The Chancellor is looking to protect viable UK businesses and avoid losing control of UK companies producing novel ideas and products to foreign investment.
Having previously guided clients through both the CBILS and Future Fund investment process BDB Pitmans can help and guide you and your business through this period of uncertainty. We offer a full service to SME and mid-market businesses, including corporate, finance, restructuring and employment.
For more information, please contact our corporate advisory team.