Future Fund - government funding to match private investment
19 May 2020: ICAEW's Corporate Finance Faculty explains how companies that secure private investment can attract up to £5m on a matched basis from the government’s Future Fund. The scheme will be open from 20 May 2020.
Purpose and form of funding
To provide working capital to certain companies which are facing financing difficulties due to the coronavirus outbreak, to help them continue their growth journey.
The funding will be in the form of convertible loans from £125k to £5m, subject to at least equal match funding from private investors.
How it works
The Future Fund is delivered by the British Business Bank.
Eligibility criteria apply to the company and its private investor(s).
Applications are made via the Future Fund portal on the British Business Bank’s website.
The application process is investor-led:
- the investor applies in connection with a company
- the company confirms the investment application details and submits a full application
- on approval, parties execute an agreement and satisfy its conditions for funds to be released
The company and the investor may each engage a solicitor in connection with the application. The role of the solicitor is explained by the British Business Bank.
Standard scheme documentation is set out by the British Business Bank.
Loan size: from £125k to £5m providing matched by private investors
Term: 36 months, with early repayment only with the agreement of all investors
Interest rate: minimum 8% pa (non-compounding). Interest is not payable monthly but accrues until the loan converts. The accrued interest will wither be repaid or convert into equity
Conversion: the loan will convert into shares in the company in certain circumstances
Standardised terms: the agreement is predefined and cannot be negotiated
Use of proceeds: restrictions apply
Each investor must fall within certain defined categories in the FCA’s handbook of rules and guidance, or in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.
A company that can participate will
- be UK-incorporated and, if part of a corporate group, must be the parent company
- have raised at least £250k in equity investment from third-party investors in the period 1 April 2015 to 19 April 2020, inclusive
- have none of its shares are traded on a listing venue
- have been incorporated on or before 31 December 2019
At least one of the following will be true about the company:
- half or more employees are UK-based
- half or more revenues are from UK sales
Update 30 June: see additional eligibility details here