Today, Chancellor Rishi Sunak announced further measures to support businesses during the Covid-19 coronavirus pandemic, but this does not fully address the needs of early-stage tech companies, according to Tech Nation.
This includes £90m in business interruption loans approved for nearly 1,000 small and medium businesses, meaning businesses with an annual turnover of less than £45m can apply for loans up to £5m.
It also includes a scheme to support larger companies not eligible for loans and 1.9 billion corporate finance provided to firms affected by the pandemic.
The Treasurer also said that lenders will be prohibited from requesting personal guarantees on loans under £250,000.
Chancellor of the Exchequer, Rishi Sunak MP, said:
“We are making great progress on getting much-needed support out to businesses to help manage their cashflows during this difficult time – with millions of pounds of loans and finance being provided to hundreds of firms across the country.
“And now I am taking further action by extending our generous loan scheme so even more businesses can benefit. We have also listened to the concerns of some larger businesses affected by COVID-19 and are announcing new support so they can benefit too.”
“Targeted interventions in the tech sector” are needed
Although these measures are designed to ensure that “more firms are able to benefit from government-backed support during this difficult time”, they may not fully meet the needs of early-stage tech startups.
This is according to Gerard Grech, Chief Executive of Tech Nation, who believes that the issues facing pre-profit tech businesses are not adequately addressed by the announcement:
“Despite more welcome changes to the Coronavirus Business Interruption Loans (CBILS) by the Chancellor this morning, it still does not appear to address a key issue we have been hearing from early stage, pre-profit tech businesses working on ground-breaking solutions, that lack the trading history for banks to consider them ‘viable’ propositions.”
“Nearly all businesses we speak to would welcome a cash injection due to cashflow issues. While many tech scale-ups are cutting costs and conserving cash, many are in the middle of raising more funding, which we’re already seeing signs of slowing down. Companies also want to minimise furloughing – losing staff would mean losing momentum and competitive advantage to domestic and international talent markets and competitors.”
“An intervention is hard to target correctly and the government has done well to launch CBILS so quickly. What is needed now are some more detailed, targeted interventions in the tech sector.”
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He believes that support should also be offered to co-working spaces, currently suffering amid lockdown measures:
“One of the UK tech sector’s greatest assets is its network of over 260 co-working spaces across the country. Co-working spaces are key to facilitating access to capital, community and customers, and provide the vital flexibility needed for innovative startups to scale.”
“Many of these spaces are independent co-working and events spaces and are currently in distress and having to close their doors. Many coworking spaces fall between the gaps of the government support outlined so far, and are losing members who can no longer pay the rent, and are unable to generate profit through events.. These smaller coworking spaces should be temporarily reclassified as hospitality venues to qualify for small business rates relief.”