How to raise investment in the USA: guide for UK startups
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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:
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.
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 |
See our definitive guide to Future Fund eligibility here. To be eligible, your company needs to fulfil the following:
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
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.
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:
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In order to be eligible:
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.
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). |
In order to be eligible, your company:
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.
Product: | Term Loan |
Size: | £100,000 – £500,000 |
Term: | A minimum of 1 year and a maximum of 3 years |
Interest fee: |
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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. |
This fund is only for social sector organisations: charities and social enterprises.
To be eligible for it your company must:
https://www.tfaforms.com/4818998
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:
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.
To be eligible for an innovation loan you must:
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:
The earlier you speak with your monitoring officer, the easier it will be to understand your issues and find potential solutions.
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.