The UK government will throw £1.25bn at startups and R&D firms that are struggling to survive in the coronavirus lockdown and are willing to pay well-above-market interest rates and give away equity in exchange for a fiscal lifeline.

The plan, announced on Monday by the Chancellor of the Exchequer Rishi Sunak, will see the government create a "Future fund" of £250m delivered in partnership with the British Business Bank.

The scheme will open in May and run until the end of September. UK-registered companies that have raised at least £250,000 in equity investment the last five years will be eligible to receive loans of £125,000 to £5 million, provided they can find matching private investment.

The funding is labelled "bridge funding" to help startups keep going in the COVID-crushed economy.

Which sounds great. But there's plenty of devil in the details on this one, as the scheme's headline terms [PDF] explain that the government wants its pound of flesh.

Interest on the loans will be at least eight per cent, payable at the end of a three-year term.

There's also a provision for the bridging finance to automatically convert into shares if a borrower manages to secure funding equal to the government loan.

Startups have and have called for the government to extend their support to the sector during the coronavirus crisis.

Earlier this month, several of the UK's biggest startups, including Deliveroo, Darktrace, Improbable, wrote to Sunak urging the government to extend its relief measures to startups.

Further assistance will flow in the form of £750m of grants and loans from Innovate UK, the nation's business-facing arm of government research and development support. The majority of the funds will be available to the agency's 2,500 existing customers. The first payments will be made in mid-May.

“Our start-ups and businesses driving research and development are one of our great economic strengths, and will help power our growth out of the coronavirus crisis," Sunak said in a press briefing on Monday.

“This new, world-leading fund will mean they can access the capital they need at this difficult time, ensuring dynamic, fast-growing firms across all sectors will be able to continue to create new ideas and spread prosperity.”

The UK has followed similar moves by France and Germany to prop up their startups. The French government unveiled a €4bn package to support its local startups in March, and earlier this month Germany pledged €2bn to help its startups weather the crisis. ®