How to raise investment in the USA: guide for UK startups
Want to attract US VCs? US legal expert Daniel Glazer of Wilson Sonsini explains what US investors look for, when to do...
In these uncertain economic times it might be difficult to raise funds using conventional avenues, but happily there are a number of schemes floating around at the moment to help the startup community, so we thought we’d put them altogether for you in one handy list:
UK Government Future Fund
Who is it for?
The Future Fund is a UK government initiative to help innovative companies which are facing financing difficulties due to the coronavirus outbreak. It’s aimed at unlisted UK registered companies which have already raised more than £250k in previous funding rounds in the last 5 years, and which can secure at least another £125k in private investment which the government will then match.
What are the key terms?
| Product: | Matched Convertible Loan |
| Size: | £125,000 – £5,000,000 |
| Term: | 3 years |
| Interest fee: | Minimum of 8% per annum, but could be higher if a higher rate is agreed between the company and the matched investors. Interest is payable at the end of maturity period (after 3 years) |
| Drawdown: | Full amount drawn down on signing
No redrawing of repaid amounts |
| Repayment: | At the end of the 3 year term, double the loan is to be repaid to the private investors if there hasn’t been a funding round before then. The government may convert its investment into equity or get 1X its money back. |
| Prepayment: | Unclear if possible when there is no automatic conversion event. Further clarifications from the government are pending. |
| Security: | Unsecured |
Am I eligible?
See our definitive guide to Future Fund eligibility here. To be eligible, your company needs to fulfil the following:
- Your company must have raised £250K or more already
- You must be able to raise at least £125K in investment yourself from private investors, which the Future Fund will then match.
- Because Future Fund is not currently SEIS/EIS compatible, you’ll need to find VC investors or persuade angel investors to forego SEIS/EIS for this round and (because of the way SEIS/EIS works) for all future investment that they make in your company.
Where do I apply for it?
The scheme will be launched at a date in May 2020, and once it has opened you’ll be able to apply here: https://www.gov.uk/guidance/future-fund
UK Coronavirus Business Interruption Loan Scheme (CBILS)
Who is it for?
CBILS provides financial support to small and medium businesses (SMEs), but has been recently expanded to allow many smaller businesses impacted by the coronavirus crisis to access funding.
What are the key terms?
| Product: |
These will be provided by private lenders who will receive a government-backed guarantee for the loan repayments. |
| Size: | Maximum £5 million |
| Term: | Term loans and asset finance facilities: up to 6 years.
Overdrafts and invoice finance facilities: up to 3 years. |
| Interest fee: | Varies depending on the private lender, but the Government will cover the first 12 months of interest payments and any lender-levied charges. |
| Drawdown: | Full amount drawn down on signing.
No redrawing of repaid amounts. |
| Repayment: | Varies depending on the private lender. |
| Prepayment: | Varies depending on the private lender. |
| Security: | Personal guarantees will not be taken for loans below £250,000.
For loans above £250,000, personal guarantees may still be required, at a lender’s discretion, but:
|
Am I eligible?
In order to be eligible:
- Your application must be for business purposes and the business must have been adversely impacted by the Coronavirus (COVID-19);
- You must be a UK-based SME with annual turnover of up to £45m;
- Your business must generate more than 50% of its turnover from trading activity;
- You must have a borrowing proposal which the lender would consider viable, were it not for the current pandemic;
- Your CBILS-backed facility will be used to support primarily trading in the UK;
- Your business must not have been classed as a “business in difficulty” on 31 December 2019, if you are applying to borrow £30,000 or more;
- You wish to borrow up to a maximum of £5m.
Where do I apply for it?
Bounce Back Loan Scheme (BBLS)
Who is it for?
The Bounce Back Loan Scheme (BBLS) provides financial support to businesses across the UK that are losing revenue and seeing their cashflow disrupted, as a result of the COVID-19 outbreak and that can benefit from £50,000 or less in finance.
What are the key terms?
| Product: | Term Loan |
| Size: | Minimum £2,000 up to 25% of a business’ turnover. The maximum loan amount is £50,000. |
| Term: | 6 years |
| Interest fee: | Fixed at 2.5% per annum. The Government will cover the first 12 months of interest payments. |
| Drawdown: | Full amount drawn down on signing.
No redrawing of repaid amounts. |
| Repayment: | The borrower does not have to make any repayments for the first 12 months and the Government will cover the first 12 months of interest payments. |
| Prepayment: | Permitted at any time without penalty. |
| Security: | Lenders are not permitted to take personal guarantees or take recovery action over a borrower’s personal assets (such as their main home or personal vehicle). |
Am I eligible?
In order to be eligible, your company:
- must have been negatively impacted by the coronavirus (COVID-19) pandemic;
- is engaged in trading or commercial activity in the UK and was established by 1 March 2020;
- is not using the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) or the Bank of England’s Covid Corporate Financing Facility Scheme (CCFF), unless the Bounce Back Loan will refinance the whole of the CBILS, CLBILS or CCFF facility;
- is not in bankruptcy or liquidation or undergoing debt restructuring at the time it submits its application for finance;
- derives more than 50% of its income from its trading activity (this requirement does not apply to charities or further-education colleges).;
Where do I apply for it?
Resilience and Recovery Loan Fund (RRLF)
Who is it for?
RRLF is a fund for social enterprises and charities who are experiencing disruption to their normal business model as a result of COVID-19. It has been established to make an existing government scheme – the Coronavirus Business Interruption Loan Scheme (CBILS – see above) more easily accessible to charities and social enterprises.
What are the key terms?
| Product: | Term Loan |
| Size: | £100,000 – £500,000 |
| Term: | A minimum of 1 year and a maximum of 3 years |
| Interest fee: |
|
| Arrangement fee: | 4% on the value of the loan
(covered by Government and no charge to the borrower) |
| Drawdown: | Full amount drawn down on signing
No redrawing of repaid amounts |
| Repayment: | Capital repayment holiday for 12 months
Amortised quarterly repayments in equal instalments commencing 12 months from drawdown |
| Prepayment: | Permitted at any time without penalty |
| Security: | All loans of under £250k will be provided unsecured.
For loans of £250k and over security will be taken in the form of a standard fixed and floating charge, where readily available with exceptions made only in exceptional circumstances. |
Am I eligible?
This fund is only for social sector organisations: charities and social enterprises.
To be eligible for it your company must:
- be included on the list of qualifying entities (see Appendix 1 in the Fund Guidelines).
- if a Company Limited by Guarantee or a Company Limited by Shares, have Social Objects in its Articles.
- have been operating for a minimum of two years.
- have a minimum turnover of £400k.
- have a turnover of less than £45m (whole group – if applicable).
- have more than 50% of income from trading activity (whole group – if applicable). This eligibility criteria does not apply to registered charities and further education colleges.
- trade in the UK and the loan will be used to support trading in the UK.
- be able to confirm that the organisation has been adversely impacted by COVID-19.
- be able to demonstrate that the organisation has a “viable” business proposition.
- be able to demonstrate that the organisation was not an “undertaking in difficulty” at 31 December 2019.
- be able to confirm that the loan will not be used in an excluded sector.
Where do I apply for it?
https://www.tfaforms.com/4818998
Capability and Innovation Fund (CIF)
CIF is a Banking Competition Remedies Limited (BCR) scheme to support companies providing innovative financial services to UK SMEs.
This scheme is currently still in a consultation period and will announce more details about the scheme mid-May, and we’ll update them here as they are announced.
For now, the eligibility criteria are that your company must be an entity:
- which is domiciled in the United Kingdom, the European Union, the European Economic Area or Switzerland;
- which (a) provides or develops financial products or services predominantly to or for SMEs in the United Kingdom or (b) provides products or services to the businesses described in (a);
- which has raised capital of at least £1,000,000 in the three years prior to the date of submission of its Business Case
Government Grants and Innovate UK schemes
Innovate UK
There is also a wide selection of governmental financial aid schemes and grants to support innovation available here: https://www.gov.uk/apply-funding-innovation
Innovation awards are being made via pilot loan competitions which can be a) themed, where your application will need to fit with specific scope criteria or b) open to any type of experimental development innovation project.
Am I eligible?
To be eligible for an innovation loan you must:
- be an SME
- be UK-based
- be planning a project that fits with the defined scope of the specific loan competition you are applying into
- apply alone. Only single SMEs may apply
Individuals, research organisations and large companies are not eligible. Collaboration with other organisations cannot be funded through a loan.
To stay up to date with the most recent Innovate UK developments we recommend the following:
- Contact your monitoring officer;
- If you are an Innovate UK award recipient, also contact your Innovate UK monitoring officer, who will keep us informed and allow us to assess if we can offer support too;
The earlier you speak with your monitoring officer, the easier it will be to understand your issues and find potential solutions.
- Speak to your local EEN advisor;
- Speak to specialist advisers from the Innovate UK Enterprise Europe Network (EEN) team who are located regionally.
Tax Breaks
Small companies that cannot afford to pay their tax bills can ask HM Revenue and Customs for a “time to pay” agreement which would suspend debt collection. During the coronavirus outbreak the usual 3.5% annual interest on deferred tax payments will be waived.
This is a working list, if you know of any other schemes, please let us know so we can share.
