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Author: Sacha Bright & Oliver Murphy
The Treasury is expected to announce a “rescue package” that could involve private investors and the British Business Bank in an effort to support the UK’s ailing start-ups.
According to The Telegraph, some of the measures that are currently being proposed could include unlocking private capital by match funding where businesses would receive investment split equally between the Treasury and private backers.
There were 672,890 companies founded in the UK between 2018/2019, with around 30,000 of these utilising equity to fund their business.
This news comes as a recent survey revealed that start-ups could bear the most damage from the Covid-19 outbreak.
Results from the survey, which was commissioned by the Enterprise Investment Scheme Association, show that based on the responses of 250 growth businesses seeking investment, 9 out of 10 face the prospect of going under if the government does not take urgent action.
Coronavirus poses an existential threat to small businesses in the UK. As NextFin has reported, while the expansion of the Chancellor’s relief package goes some way to support previously excluded early-stage companies, it needs to go much further as many businesses still remain without support of any kind.
As a result of the above and the seeming lack of attention paid to start-ups in the UK, Crowdcube and a range of other companies including NextFin united to launch the Save Our Startups Campaign.
Launched on April 5, the letter, which has received over 5500 signatures, urges the government to make changes to the SEIS and EIS to encourage private equity investment, pointing to programs implemented by France and Germany as well as a European-wide investment initiative estimated to be worth around £33bn.
In its own open letter, NextFin recommends that start-ups would get help faster if the government extended CBILS to all regulated P2P lending sites.
“The government needs to recognise that a good way to get money to small businesses quickly is to extend the loan to all regulated P2P lending sites. Banks are simply not structured to process hundreds of thousands of SME loan applications at one time.”
“As a consequence, far too many businesses could go to the wall unless P2P lending sites are brought in to assist with processing loans.”
While the exact details of a bailout package are unknown, it would appear that civil servants are realising the dangers of excluding such a key group from the CBILS.
Responding to the news, Sacha Bright, CEO of NextFin said: “The government needs to be creative and offer incentives to mobilise private investor’s cash to invest in the businesses currently excluded from the government’s emergency relief packages.”
“Equity crowdfunding and P2P investment utilises private investment, not government funds, to invest in businesses thus enabling them to survive.”
More details about the way in which the government can stimulate investment in small businesses and protect the economy can be found in our analysis.
Disclaimer
To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional legal advice on any topic discussed.
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