Fast-growing British tech companies could collapse if state-backed loans are not opened up to loss-making businesses, MPs have warned.
Banks have told start-ups that have applied for the Coronavirus Business Interruption Loan Scheme that they need to have been profitable for three years to be classed as viable businesses.
A cross-party group of MPs including Labour and Co-Op MP Meg Hillier and Bim Afolami, a Conservative, are understood to have written to Chancellor Rishi Sunak last week to voice concerns over whether enough has been done to support innovative businesses which have not yet turned a profit, questioning whether the existing business package is suitable for start-ups.
In the letter, MPs urged the Chancellor to provide a boost to start-ups through the state-backed British Business Bank.
Those calls have been echoed by investors, including MMC Ventures partner Simon Menashy, who said the Government should be offering loans and other financing packages to start-ups.
Earlier this month, Angular Ventures sent its investments a guide to “surviving coronavirus” which warned that “this is going to make fundraising hard for all startups.”
It is thought many venture capital firms have been urged by their limited partners to hold off on making big bets.
“There are definitely a bunch of funds being told to stop investing – mostly the ones backed by corporate or family office money,” one industry source said.