The UK government has announced a much needed £1.25bn support package for the UK’s start-ups.

The package is broken down into two elements; a £500m fund designed for small businesses and the provision of £750m in grants and loans from Innovate UK.

To qualify for support, companies must have already raised £250,000 in equity investment through private investment channels within the last 5 years.

Rishi Sunak’s announcement to assist start-up businesses comes after it became apparent the treasury’s initial stimulus package wouldn’t filter down to the UK’s fastest growing and most innovative companies.

The banks are ultimately in control of distributing the government’s £350 billion aid package for businesses. With only 80% of the value of loans being guaranteed by the government, banks still have to accept some risk so haven’t approved loans on the scale needed to support smaller businesses. Many other countries have guaranteed 100% of loans to businesses.

The latest package is aimed at those companies engaged in high levels of R&D and may not yet be producing enough revenue to cover costs.

These innovative companies typically operate in the technology and knowledge intensive sectors and face closure if they are unable to secure capital.

Gerard Grech, Chief Executive, Tech Nation, highlighted the importance of startup sfor the UK as he said “Tech startups and scaleups are crucial to the UK’s future growth, jobs and innovation. The £500M Future Fund and £750M for loans and grants for R&D for startups is a bold intervention, and although the full implementation details are to still be released, it is likely to give the sector a welcome boost in these unprecedented times. How to target the money effectively should be the next priority.”

“Start-ups and scale-ups vary in their financial structuring and their regional location. It will be important to get the balance just right, across the UK and also across the different models of investments, from angel invested companies to VC-funded firms.”

“The UK’s tech sector has achieved a huge amount in the past 10 years. In 2019, a staggering 33% of all European tech investment was in the UK – the third highest in the world. We must keep building on this success story”