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UK Budget Announcement – Future Fund: Breakthrough and the Recovery Loan Scheme

In his recent Budget, Chancellor Rishi Sunak announced that the Government will be launching a successor to the successful Future Fund scheme and will be replacing the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS) – which are all due to end on 31 March 2021 – with a new Recovery Loan Scheme. Both schemes will cultivate innovation, investment and growth throughout the UK economy.

 Future Fund: Breakthrough

British tech companies raised a record £11bn last year.  London remains the hotspot for Europe but here in Scotland, we also saw very high levels of investment activity last year.  Here at MBM, Zara Diloo, a Director in the corporate team, led our efforts assisting clients with Future Fund applications and we are proud to have completed a number of Future Fund investments.  Although the original Future Fund scheme has closed for applications, there is something new in its place:  The Future Fund Breakthrough.

The initial pot is expected to be £375m and is for helping fill the scale-up funding gap.  Why is the Government doing this?  Simple:  there are huge benefits for the Economy which has been severely impacted by the effects of the pandemic.  It is estimated that a 1% growth in these companies could boost the UK Economy to the tune of £38bn. 

We don’t know much of the detail just now.  Just like the Future Fund, this scheme will see the Government take stakes in high-growth companies.  Initial reports suggest that companies with high R&D intensity aiming to raise at least £20m will be eligible to apply with the Government matching amounts invested by private venture capital. 

According to recent reports, the Government has been in discussions with the Abu Dhabi-based sovereign wealth fund, Mubadala Investment Company about backing a new life-sciences investment vehicle.  This and the recently published report commissioned by the Treasury (the ‘Kalifa Report’) recommending a £1bn fintech growth fund shows that nurturing our high growth companies is firmly on the Government’s agenda.  Watch this space!

The Recovery Loan Scheme

The Recovery Loan Scheme aims to ensure that businesses of any size can continue to access loans and facilities up to £10 million per business once the existing COVID-19 loan schemes close. The new scheme will provide continued support for businesses recovering from the disruption caused by the pandemic and any issues resulting from the end of the Brexit transition period. The Recovery Loan Scheme launches on 06 April 2021 with further details on how to apply being released in due course.

Under this scheme, the Government will guarantee 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses. Once the business receives the funding, it can be used for any legitimate business purpose including investment and growth.

Whilst more details are yet to follow, we are aware that there will be a wide range of financial products available:

  • term loans and overdrafts will be available between £25,001 and £10 million per business; and,
  • invoice finance and asset finance will be available between £1,000 and £10 million per business.

Finance terms will be up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years. In addition, no personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.

Am I eligible for the Recovery Loan Scheme?

The Scheme outlines that if your business is trading in the UK, you will be eligible to apply if you can show that your business:

  • is viable or would be viable were it not for the pandemic;
  • has been impacted by the coronavirus pandemic; and
  • is not in collective insolvency proceedings (however, further details will be provided in due course).

Businesses from any sector can apply for the Recovery Loan Scheme, except:

  • banks, building societies, insurers and reinsurers (although insurance brokers are eligible);
  • public-sector bodies; and
  • state-funded primary and secondary schools.

In addition, any business that has received support under CBILS, CLBILS or BBLS may still be eligible for the Recovery Loan Scheme, as long as they meet all other eligibility criteria.

We look forward to providing further updates on either scheme once more information becomes available. If you have any questions on the Future Fund: Breakthrough, please contact Zara Diloo.  For any questions on the Recovery Loan Scheme, please contact Alex Brock.

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