What is the Future Fund?
The Future Fund scheme offers convertible loans to innovative companies who typically rely on equity investment and are currently affected by the COVID-19 pandemic.
The loans are designed to support businesses through the current economic disruption and recovery, to enable them to continue to grow and reach their full economic potential.
A total of £250 million has been made available by the UK Government, with potential for more money to be made available. The initial application period is open until the end of September 2020.
How it Works
There are 3 main steps to apply:
- The investor, or lead investor of a group of investors, certifies they meet the scheme eligibility criteria and provides key investment details.
- The company confirms the accuracy of the investment application details provided, before submitting the full application.
- In the case of approved applications, all parties will execute an agreement (in the template form provided) and satisfy certain conditions set out in the agreement before the funds are released.
The following points cover how much you can apply for, how the loan can be used and how the loan will work:
- The Future Fund loan amount provided to the company ranges from £125,000 to £5 million. Amounts of Future Fund loans must be at least matched by co-investment from investors.
- The Future Fund will match 100% of the amount provided by investor(s), up to a maximum of £5 million.
- The loans will have a minimum of 8% per annum (non-compounding) interest charge applied. This interest will be higher if the company and the investor(s) agree between themselves.
- The interest is not payable on a monthly basis and instead will accrue until the loan converts. At this point, the interest will either be repaid or convert in equity.
- Funding must not be used to:
- repay any borrowings
- pay any dividends
- pay any bonuses
- pay any advisory fees.
- The loan will mature after 36 months.
- The loan cannot be repaid early by the company other than with the agreement of all of the investors.
- The loans will convert into shares in the company in certain circumstances, including an exit or a new funding round.
The investor must fall within any of the following categories:
- an “investment professional” within the meaning given to that term in article 19 of the FPO
- a high net worth company, unincorporated associated or high value trust falling within article 49(2) of the FPO
- a “certified sophisticated investor” or a “self-certified sophisticated investor” within the meaning given in articles 50 and 50A respectively of the FPO
- a “certified high net worth individual” within the meaning of article 48 of the FPO
- an equivalent professional, high-net worth, institutional or sophisticated investor in accordance with applicable law and regulation in such investor’s home jurisdiction
- an association of high net-worth or sophisticated investors within the meaning of article 51 of the FPO
- capable of being classified as a “professional client” within the meaning given in the glossary to the FCA Rules
Note that all other investors must fall within one of the above categories in order for them to be eligible to invest in the convertible loan agreement. It is the responsibility of other investors to ensure they are eligible.
To be eligible for the scheme, the company must meet the following criteria:
- The company must have raised at least £250,000 in equity from third-party investors in previous funding rounds in the last five years (from 1 April 2015 to 19 April 2020, inclusive)
- If the company is a member of a corporate group, it must be the ultimate parent company
- The company does not have any of its shares or other securities listed on a regulated market, a multilateral trading facility, a recognised investment exchange and/or any other similar market, stock exchange or listing venue
- The company must be a UK incorporated limited company
- The company must have been incorporated on or before 31 December 2019
- At least one of the following must be true for the company:
- Half or more employees are UK based
- Half or more revenues are from UK sales
Full details about the Future Fund, the role of an Investor, Company and Solicitor and how to apply can be found on the British Business Bank website here.
Other COVID-19 business support schemes are also still available, and you can check your eligibility on the UK Government’s dedicated support finder tool here.
Innovative businesses can also check their eligibility for the Innovate UK support schemes:
- Timing extensions
- Monthly grant payments
- Continuity Grants
- Innovation Continuity Loans
- Innovation and Growth Adviser support;
by using the Innovate UK COVID-19 support questionnaire here.