Coronavirus Future Fund (investor-matched loans)
This scheme will issue convertible loans between £125,000 to £5m to innovative companies which are facing financing difficulties due to the outbreak.
Announced by the Chancellor on 20 April, the Future Fund issues convertible loans to innovative UK companies with good potential, that typically rely on equity investment and are currently affected by Covid-19. The scheme will help these companies through the current period of economic disruption and the recovery, so they are able to continue their growth trajectory and reach their full economic potential. The Scheme is designed by government and delivered by the British Business Bank.
The Government has made £250 million available for the Future Fund, and will keep this amount under review. The scheme was initially open for applications until the end of September 2020 and has now been extended to the end of January 2021.
How it works
1: Investor applies
- The investor, or lead investor of a group of investors, certifies they meet the scheme eligibility criteria and provides key investment details.
2: Company confirms
- The company confirms the accuracy of the investment application details provided, before submitting the full application.
3: Contract is finalised
- 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.
Investor-led Process: The application process is investor-led. This means an investor, or lead investor of a group of investors, applies in connection with an eligible company.
Match funding: The Future Fund will match 100% of the amount provided by investor(s), up to a maximum of £5 million.
Use of proceeds: Funding must not be used to (a) repay any borrowings; (b) pay any dividends; (c) pay any bonuses; (d) pay any advisory fees.
Interest rate: 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. 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.
Term: 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.
Conversion: The loans will convert into shares in the company in certain circumstances, including an exit or a new funding round.
In order to be eligible for the scheme, each of the investor(s) and the company must meet specific criteria.
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
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
Further information can be seen on the Future Fund website.
For advice, speak to our Access to Funding and Finance team.