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.

Recommended

What happened to Credit Suisse?
Economy

What happened to Credit Suisse?

UBS acquired Credit Suisse at £2.65bn on Sunday afternoon – significantly below its closing value on Friday, which was around £7bn. We take a look at …
20 Mar 2023
Can I avoid IHT by stuffing all my money into a pension?
Personal finance

Can I avoid IHT by stuffing all my money into a pension?

The ditching of the lifetime allowance could enable millions of pension savers to avoid inheritance tax. We explain how.
20 Mar 2023
Profit from the rise of shareholder activism in Japan’s small companies
Share tips

Profit from the rise of shareholder activism in Japan’s small companies

A professional investor tells us where he’d put his money. Daniel Lee, head ofJapan Research, AVI Japan Opportunity Trust, highlights three promising …
20 Mar 2023
When will interest rates go up?
UK Economy

When will interest rates go up?

The Bank of England has many things to consider ahead of its decision later this week.
20 Mar 2023

Most Popular

Government plans could see NS&I boost interest rates
Savings

Government plans could see NS&I boost interest rates

The government-backed bank has a new funding target, which could prompt it to boost the rates on its Premium Bonds, ISAs and bonds.
16 Mar 2023
Share tips of the week – 17 March
Investments

Share tips of the week – 17 March

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages
10 Mar 2023
How to make your child a tax-free millionaire by age 37
Investments

How to make your child a tax-free millionaire by age 37

Exclusive research for MoneyWeek reveals how funding an ISA and a pension for your child until age 18 could build up a seven-figure sum by the time th…
14 Mar 2023