The Government, alongside the British Business Bank, have launched the Future Fund for innovative companies with good potential, that typically rely on equity investment and are currently affected to receive loans equalling investments from private investors. This may be good news for those businesses in the life sciences, innovation and technology.

The British Business Bank claim the scheme will help these companies through the current period of economic disruption and the recovery, allowing them to continue their growth trajectory and reach their full economic potential. The loans may be an option for business that rely on equity investment, and are otherwise unable to access other government business support programmes. The scheme is open for applications until the end of September 2020.

How it works and eligibility

Your business is eligible if:

  • it is UK-incorporated – if your business is part of a corporate group, only the parent company is eligible
  • it has raised at least £250,000 in equity investment from third-party investors in the last 5 years
  • none of its shares are traded on a regulated market, multilateral trading facility or other listing venue
  • it was incorporated on or before 31 December 2019
  • at least one of the following is true:
    • half or more employees are UK-based
    • half or more revenues are from UK sales

 

Investor applies

The investor, or lead investor of a group of investors, ensures 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 and satisfy certain conditions set out in the agreement before the funds are released.

Key Features

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.

Companies are still able to register their interest – see the Companies page for information.

Match funding

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

Loan size

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.

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.

Standardised terms

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

 For information about Business Finance, such as CBILS Loans, Asset Finance or Asset Re-finance, get in touch with our team at 0161 429 6949 or email info@johnsonreed.co.uk