British start-ups with American parent company investors will be allowed to borrow money from the government’s £250m Future Fund.

Until now, British start-ups ultimately owned by American investors have been barred from Future Fund loans.

However, many of Britain’s most exciting start-ups have won places on prestigious American accelerator programmes, such as Silicon Valley’s Y Combinator, which initially offers $150,000 in seed funding in exchange for a 7 per cent of the company. Successful Y Combinator investments include Dropbox and Stripe.

>See also: Demand for Future Fund drains its £250m capacity within just one day

UK tech firms that have gone through the programme then pitch for US investment.

The Treasury is prepared to weather the inevitable storm over whether British taxpayers should subsidise American investment verses the long-term attractiveness of start-ups that have had to temporarily relocate to America. British start-ups taken on by accelerator programmes mostly have to spend time in the US.

The announcement about the relaxing of the rules over shareholders will be made at the same time as the fund is expanded, according to the Sunday Times.

The volume of applications for the Future Fund on its first day was almost double the amount of funding capacity available.

The £250m Future Fund received over £400m worth of applications from start-ups on its first day yesterday, May 20, implying £906m of capital has been pledged in less than 24 hours to innovative British businesses, according to Sky News.

Any start-up applying for a Future Fund loan must have matching funding from a venture capitalist.

One Whitehall official told Sky News that at the close of business on Wednesday, May 20 the figure had reached £453m, suggesting that the Future Fund will almost immediately have to double capacity to £500m, as chancellor Rishi Sunak had promised.

Further reading

Future Fund – government tech start-up bailout scheme how it works