On 20 April 2020, the Future Fund of £250 million was set up to support the UK’s innovative businesses, to assist in combatting the economic effects of Covid-19 and to facilitate recovery and growth. This summary outlines the features and eligibility criteria, as well as how to apply.
The Future Fund is for businesses that have been unable to access other government business support programmes (CBILS, CLBILS and BBLS), because they are either pre-revenue or pre-profit and typically rely on equity investment.
Under the scheme, funding will be unlocked by private investment on a match-funded basis, the effect of which is to double the amount of investment available to a company.
Loans will range from £125,000 to £5,000,000.
On Monday, the Government provided further detail of the Future Fund scheme, which can be found here. The online application portal is accessible as of 20 May 2020. Like the other government business support programmes, the Future Fund operates in partnership with the British Business Bank and applications under the scheme can be made until the end of September 2020.
Initial reports confirm that the fund received £450 million worth of applications on its first day alone, suggesting that demand for Future Fund loans will be incredibly high.
Key features of a Future Fund loan
The scheme is open to eligible applicants who meet the following criteria;
How to make an application under the Future Fund
Lead investors will apply on behalf of businesses (and other investors), via the online portal, with applications being processed on a first come first served basis.
The company itself does not initiate the process, but will be required to verify the details submitted by the lead investors. The business needs to identify a lead investor to submit the application for them; any person can be a lead investor, so long as they have made a commitment of at least £12,500.
Information about the lead investor and the other investors is used to conduct background checks, to create the legal contracts, and circulate these for signing.
Things to consider before applying for a Future Fund loan
Loans are advanced under a convertible loan agreement, and cannot be used to:
The majority of the terms of the loan (and the convertible loan agreement) are non-negotiable, but companies and investors will still need to appoint lawyers, because of the requirement for a firm of lawyers to confirm in writing that they hold the match-funding from investors in their client account.
Loans under the Future Fund are not SEIS/EIS compatible. If companies are able to find investors willing to participate in loan arrangements as part of the Future Fund, be aware that the standard Future Fund documentation doesn’t contain a standard set of investment terms. So, the scheme could prove to be expensive for companies where their lead or co-investors seek supplemental terms.
The scheme, overall, is likely to be less attractive to start-up companies than traditional seed or angel investment. Start-up companies should therefore explore other financing/investment options before applying for a loan under the Future Fund scheme.
You can find details of other government measures to support public services, people and businesses through this disruption on the Government’s Business Support website.
For more information on the CBIL, CLBIL and BBL schemes and to make an application under these schemes please visit www.british-business-bank.co.uk.