Sunak’s start-up scheme could overlook female entrepreneurs

The UK government announced on April 20 that it will fund a £1.25bn support package for “innovative firms hit by coronavirus,” including a £500m loan scheme for high-growth firms and £750m dedicated to businesses in Research and Development (R&D).

The package aimed at providing profitable start-ups with additional support to survive the current market downturn will provide significant help for small businesses, but while EY partner and UK Entrepreneur Of The Year leader Joanna Santinon welcomes the support package, she says female founders are less likely to apply and receive funding.

“In order to access the government start-up scheme, you must have already received funding from an investor,” she says. “However, existing research shows that women-led businesses are less likely to receive venture capital (VC) funding.”

Santinon points out that the British Business Bank’s UK VC & Female Founders report highlighted that less than one percent of venture capital funds in the UK went to start-ups ran entirely by women.

“The key with the new start-up scheme will be trying to ensure that this funding challenge does not further exacerbate the gap between male and female entrepreneurs,” she adds.

Driving fast-growing businesses

“To some extent, this will be a process of identifying the businesses expected to survive in the long term; it’s not about what sector they’re in, but their individual outlook,” she says. “It’s about preserving innovation and employment for the future and focusing on the businesses that can ride this crisis out.”

The pandemic is an opportunity for small enterprises and start-ups to re-assess their business continuity plan and model – a make or break for those new to the market.

“Lots of businesses are taking the opportunity to reassess their business model to pivot. And for some of those, it might make them a bigger, better, stronger business. As they broaden or shift their offerings, it just might give them additional firepower as we come out of coronavirus,” Santinon says.

However, investors also have a part to play within the government’s new scheme as funding could come in late.

“One of the things that start-ups are focused on is the time it is taking for financial support to come through. The government start-up scheme offers a loan which is convertible into equity; it also requires matched investment from investors, so the amount of cash to reach start-ups and how quickly it happens will, to some extent, depend on the speed and the appetite of investors,” she says.

Santinon says the firm is currently advising its clients to “look after their people, managing and securing position” whilst “focusing on their supply chain and wider stakeholder group.”

She believes the government has done a “great job” by introducing the Coronavirus Job Retention Scheme (CJRS) in such a short period of time.

“It would be wrong to say it is currently a frictionless experience. Like anything that has been rushed to market, it has some challenges attached to it. The evidence would suggest that businesses are looking on track to start receiving money back as early as the end of April. The proof will be in the pudding,” she says.

Businesses that have been suspended by the coronavirus are more reluctant to apply for the Coronavirus Business Interruption Loan Scheme (CBILS) due to fear of not recovering from the pandemic.

Santinon says one of her clients, a female founder running a small business that closed during lockdown, is unwilling to take a loan as “it is unclear when the business will come back” and is uncertain as to “when she could repay the loan.”