The government’s latest support package will go live tomorrow (20 May) when the future fund opens for applications.
The £500m fund offers convertible loans ranging from £125,000 to £5m from the government, subject to at least equal match funding from private investors.
Firms must have previously raised at least £250,000 in equity investment from third-party investors in the past five years.
The loans will have a minimum annual interest rate of eight per cent.
Unlike a typical bank loan, the interest is not payable on a monthly basis and instead will accrue until the loan matures after 36 months. At this point, the interest will either be repaid or convert in equity.
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Eligible companies can register their interest through the British Business Bank but applicaitions have to be made by a connected investor.
Funding must not be used to repay any borrowings, dividends, bonuses or advisory fees.
There have already been doubts regarding whether this scheme will work.
David Hough, partner for tax and advisory firm Blick Rothenberg, has argued that it is a tough time for firms to find external investment and it would be more attractive if existing seed enterprise investment scheme reliefs were expanded.