Future Fund may not encourage investors to invest

by Startacus Admin

Enterprise Investment Scheme Association welcomes new Future Fund, but questions how attractive it is to private investors to invest on current terms.

The membership organisation for many of the investment funds supporting the future high growth and technology businesses in the UK, the Enterprise Allowance Scheme Association (EISA), has welcomed the Government’s ‘Future Fund’ announcement today, but warns that it may well not have the desired result of truly backing the UKs future ‘Unicorn’ businesses.

The Future Fund has been launched in response to concern that the new CBILS loan scheme, which offers an 80% Government Guarantee, with no interest to pay for 12 months, and requiring no security or personal guarantees whatsoever, may not be eligible for early start growth businesses as they have no profit record.

Whilst the details of the fund will not apparently be clear until May, it appears that any monies being committed by the new fund will have to be matched pound for pound by private investors.

The real issue at the moment according to Mark Brownridge, Director General of the EISA, is that private investors are simply too nervous to invest on the current terms available to them and need more advantageous tax treatment rather just than matched funding, on what would appear to be much better terms for the Government than the private investors would receive under their investment.

“Positioning the additional support as a convertible loan, carrying an 8% interest rate and a 20% discount on conversion, all in favour of the Government, will be of very little encouragement for private investors to invest alongside. We need to be focusing on encouraging new investors, and the only way to do that is through more advantageous tax treatment for them, which is what the EISA, along with other investment funds, has been lobbying for,” he claims.

“Over the coming weeks we need to be working with the Government in finalising the terms of the new Futures Fund, to ensure both that the terms are as good as the CBILS scheme, and that we do all we can to encourage the additional investment appetite from private investors, which must include more favourable tax treatment for an interim period whist the uncertainties caused by the crisis continue. In the EISA we stand ready to play our part in the discussions,” adds Mark Brownridge.

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• #investment
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Published on: 20th April 2020