This scheme will issue convertible loans between £125,000 to £5 million to UK-based innovative companies, subject to at least equal match funding from private investors.
These convertible loans may be an option for businesses that rely on equity investment and are unable to access other government business support programmes because they are either pre-revenue or pre-profit.
The scheme is open for applications until the end of September 2020.
About the Future Fund
This will be delivered in partnership with the British Business Bank and launched in May 2020.
It will provide UK-based companies with between £125,000 and £5 million from the government, with private investors having to at least match the government commitment.
These loans will automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if they are not repaid.
To be eligible, a business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third-party investors in the last five years.
The government is committing an initial £250 million in funding towards the scheme, which will initially be open until the end of September. The scale of the fund will be kept under review.
UK-incorporated – if your business is part of a corporate group, only the ultimate parent company is eligible
Have previously raised at least £250,000 in equity investment from third-party investors in the last 5 years (from 1 April 2015 to 19 April 2020, inclusive)
None of the shares are traded on a regulated market, multilateral trading facility or other listing venue
Incorporated on or before 31 December 2019
At least one of the following is true:
half or more employees are UK-based
half or more revenues are from UK sales
Key Features of the Scheme
Investor-led process – an investor, or lead investor of a group of investors, applies in connection with an eligible company
The Future Fund will match 100% of the amount provided by investor(s), up to a maximum of £5m.
The Future Fund loan amount provided to the company ranges from £125k to £5m.Amounts of Future Fund loans must be at least matched by co-investment from investors.
Funding must not be used to:
Repay any borrowings;
Pay any dividends;
Pay any bonuses;
Pay any advisory fees.
The loans will have a maximum of 8% per annum (non-compounding) interest charge applied.This interest will be higher if the company and the investor(s) agree between themselves. Unlike a typical bank loan, 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.
The loan will mature after 36 months.
The loan cannot be repaid early by the company other than with the agreement of all the investors.
Conversion – the loans will convert into shares in the company in certain circumstances, including an exit or a new funding round.
Standardised terms – Investors and the Future Fund both invest using a convertible loan agreement, which is predefined and cannot be negotiated.