The Future Fund opened for applications on Wednesday 20th May 2020. The new Government scheme offers convertible loans to UK businesses ranging from £125,000 to £5 million, the loan amount is based on matching convertible loans made by private investors and additional criteria. The scheme does not meet the current rules for the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS).
So far, the Government has allocated £250 million towards the Future Fund on a first come first served basis.
The Future Fund – how does it operate?
Applications to the Future Fund scheme are managed by the British Business Bank and are open until September 2020. The application itself is to be completed and submitted online by a lead investor nominated by the business rather than the business itself. Although the business has obligations to review and confirm the information within that application.
There are restrictions on how the loan proceeds can be used, some of these restrictions prohibit repaying shareholder or related party loans, or for 12 months paying dividends, bonuses and discretionary payments other than those contracted before 20th May 2020.
The loan will mature after a maximum of 36 months. The interest rate is no less than 8% (non compounding) per annum, payable upon maturity of the loan. There is a discount rate of at least 20% upon conversion of the loan.
There is additional eligibility criteria:
- The business must be a UK company that was incorporated on or before 31st December 2019;
- The business must have raised at least £250,000 in equity investment from third-party investors within the last five years (the period 1st April 2015 to 19th April 2020 inclusive);
- If part of a group of companies, only the parent company is eligible;
- None of the shares of the business are traded on a regulated market, multilateral trading facility or other listing venue; and
- At least one of the following must be true for the business:
- Half or more employees are UK-based; or
- Half or more revenues are from UK sales.
The Future Fund is another Government initiative to provide support to high growth businesses during the coronavirus crisis, Rishi Sunak is reported to have said:
“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.
“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.”
How Nelsons can help
At Nelsons, we frequently advise businesses on funding arrangements and related documentation. If you would like any additional information in relation to the Future Fund, please get in touch with Palbir or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online enquiry form.