Future Fund

The Future Fund will provide government loans to business that are struggling due to the current pandemic. These loans may be suitable options for businesses that rely on equity investments and are unable to access the Coronavirus Business Interruption Loan Scheme.

The Future Fund will provide government loans to UK-based companies ranging from £125,000 to £5 million.

Key features of the scheme

The table below highlights the key features of the scheme, including interest rates and the loan term amongst other essential information regarding the Loan.

Investor-led process Match funding

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.

Companies are still able to register their interest – for more information visit the British Business Bank’s website on information for companies.

The Future Fund will match 100% of the amount provided by investor(s), up to a maximum of £5 million.

Loan size Use of proceeds

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.

Funding must not be used to:

Repay any borrowings

  1. Pay any dividends
  2. Pay any bonuses
  3. Pay any advisory fees

More information and clarity can be found further down this page under the eligibility section.

Interest rates Term

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 coverts. 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 of the investors.

Conversion Standardised terms

The loan will convert into shares in the company in certain circumstances, including an exit or a new funding round.

Investors and the Future Fund both invest using a convertible loan agreement, which is predefined and cannot be negotiated.

Eligibility

To be eligible for the scheme businesses must secure an equal or greater amount of match funding from private investors. They must also be a U.K. registered private company that has previously raised at least £250,000 in private investment in the last five years.

As stated by the British Business Bank website, to be eligible for the scheme, the company must meet the following criteria:

  1. 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)
  2. If the company is a member of a corporate group, it must be the ultimate parent company
  3. 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
  4. The company must be a UK incorporated limited company
  5. The company must have been incorporated on or before 31 December 2019
  6. At least one of the following must be true for the company:
    1. Half or more employees are UK based
    2. Half or more revenues are from UK sales

An eligibility tool has been provided by the British Business Bank and can be found HERE.

The British Business Bank have also issued a statement pertaining to the use of the proceeds of the convertible loan agreement. It has been announced that proceeds cannot be used for the following:

  1. Repay any borrowings from a shareholder or a shareholder related party (other than the repayment of any borrowings pursuant to any bank or venture debt facilities);
  2. Pay any dividends or other distributions;
  3. For a period of twelve months from the date of the relevant convertible loan agreement, make any bonus or other discretionary payment to any employee, consultant or director of the company other than as contracted prior to the date hereof and as paid by the Company in the ordinary course of business; or
  4. Pay any advisory or placement fees or bonuses to any corporate finance entity or investment bank or similar service provider on monies advanced by the Future Fund.

A visual representation of the role of the Company as part of the application process can be found HERE.

How to apply

The scheme is being delivered by the British Business Bank, and it is now LIVE. Information regarding the process of application has been provided with three steps needed to obtain the loan:

Investor applies
The investor, or lead investor of a group of investors, certifies they meet the scheme eligibility criteria and provides key investment details.
Company confirms
The company confirms the accuracy of the investment application details provided, before submitting the full application.
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.

More information can be found on the HMRC website: https://www.gov.uk/guidance/future-fund

Should you have questions or specific queries relating to the Future Fund scheme, please contact us on 01753 888211 or email info@nhllp.com As ever, we are here to help.

The information that we have provided is for general purposes only and therefore does not constitute professional advice. Appropriate professional advice should be sought for individual circumstances before any further action is taken.