Start-ups could be finished without government help

Many start-up companies are unlikely to qualify for help from the government’s Business Interruption Loan Scheme.

Amid the generous government support schemes for different types of business unveiled so far, assistance for one group is conspicuous by its absence. Many of Britain’s start-up companies are unlikely to qualify for most of the help available.

The problem for many of these companies, including thousands of technology businesses, is that while their sales may be growing very rapidly, they have yet to break even. 

This will make it almost impossible for them to claim support from the government’s Business Interruption Loan Scheme, which is only for businesses that can show they would have been economically viable had it not been for the Covid-19 pandemic; most banks will only lend to previously profitable companies.

Nor are these start-ups going to get much help from the Self-employment Income Support Scheme. A few one-man bands may qualify, but most are beyond the scope of the scheme and no start-up launched after 6 April 2019 is eligible.

Still, it’s not all bad news. Some start-ups can tap the Job Retention Scheme, which could help them retain and pay workers. Other initiatives, such as the right to defer VAT payments, may also be valuable. Still, start-ups that may have seen their revenues disappear in this crisis have so far been offered little tailored support despite the potential contribution many of these businesses will make to the UK economy, employment and tax revenues inthe future.

Many of those in the start-up sector are very worried. Crowdfunding platform Crowdcube has this week launched the Save our Start-ups campaign, an attempt to lobby ministers for direct assistance. The incubator Founders Factory is calling for a “runway fund” that would take equity stakes in high-growth start-ups to support them through the crisis. There are international models for delivering such assistance. Both Germany and France have launched bespoke Covid-19 support schemes for their fledgling firms, offering help such as equity investment, loans and tax credits. If the UK fails to follow, it could lose a generation of businesses with huge potential.

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