The Government’s £250m Future Fund has approved just 53 loans to tech start-ups worth £56m in its first fortnight.
This is despite 533 tech start-ups submitting applications for Future Fund backing, with £515m of funding applied for on its first day – nearly exhausting its paper capacity on day one.
The chancellor suggested another £250m would be made available when the first tranche has gone.
The gap between Future Fund applications and convertible loans actually awarded is explained by the minimum 21-day lag it takes to process applications, said British Business Bank, which is operating the fund.
The Future Fund scheme has only been up-and-running for two weeks.
Keith Morgan, CEO, British Business Bank said: “Since the chancellor announced the Future Fund on April 20, the British Business Bank has delivered an open access online transaction process to issue convertible loan notes. This rapid build has enabled businesses to gain access to finance through the scheme quickly and efficiently.”
The Future Fund was designed to support start-ups through the coronavirus crisis through government loans ranging from £125,000 to £5m, subject to matched funding from investors.
Incentivise angel investors
Meanwhile, law firm Buckworths has written to chancellor Rishi Sunak calling on him to incentivise angel investors, many of whom will be investing alongside the Treasury in the Future Fund.
The letter, which is signed by a further 87 UK businesses from sectors including hospitality and tech, calls on the Treasury to launch a temporary tax break for angel investors backing small businesses, helping businesses to repay Covid-19 debt and relaunch themselves.
Investors providing matched funding under the Future Fund cannot claim Enterprise Investment Scheme relief on their investment. To rectify this issue, the letter calls for the Treasury to introduce a temporary tax relief similar in nature to the EIS.