Britain’s start-up package could dramatically increase in size over the next few months, with signs no cap had yet been decided on how much taxpayer cash could be pumped into the scheme.
Earlier this week, Chancellor Rishi Sunak told MPs he would be “more than happy” to expand the Future Fund if there was excess demand from start-ups.
The Government initially assigned £250m in cash to the scheme, which would be invested into start-ups as convertible loans of between £125,000 and £5m.
However, on its first day of opening yesterday, the Treasury reportedly saw a boom in applications, with Sky News reporting late last night that applications to the scheme had totalled more than £453m.
The Telegraph understands that the scheme will be increasing based on how much demand there is for it and, so far, there is not thought to be any cap set on how large it could become. This would suggest the taxpayer-backed package could be significantly larger than first envisaged.
Some estimates indicate around 7,000 companies could be eligible for the scheme, and that a “fair good chunk” of those are keen to access it. At the £250m figure, only 2,000 companies would be able to receive cash under the scheme, if they all were looking for the lowest amount available of £125,000. This would fall to 50 companies, if all of those applying were looking for £5m loans.
The scheme is expected to run until September.
A spokesperson for the Treasury said: “The Future Fund opened for applications yesterday morning and there has been strong interest in the scheme.
“We have been clear that we will consider increasing government funding into the scheme should that be necessary.”
Some of the demand seen on Wednesday may not translate into funding and it is thought some firms may not be eligible to receive the funding. Under the scheme, British businesses are able to get convertible loans from the Government on the condition that they can secure the same amount from private investors.
Companies will need those investors to apply on their behalf. The loans taken by the Government will almost all convert into equity on the companies’ next funding rounds.
The strong demand for the scheme signals the growing pressure on start-ups, which have been unable to access other government coronavirus support schemes.
Earlier today, research from Plexal and Beauhurst suggested that since Britain’s lockdown was introduced, funding for UK start-ups was down 50pc on the same period last year.
Companies trying to raise capital for the first time saw a sharper drop, with the amount invested in those businesses since lockdown down 80pc compared to the period last year.