- 21st April 2020
- Posted by: Edward Kirkby
- Category: Coronavirus
To assist innovative companies that have are facing financial difficulties as a result of the Coronavirus outbreak, the government has announced the Future Fund, a new scheme which will issue convertible loans to such companies.
The Future Fund is designed to assist those businesses who are unable to access the Coronavirus Business Interruption Loan Scheme due to relying on equity investment to survive – something that is typical of startups.
In partnership with the British Business Bank, the government will be making an initial £250m available through the Future Fund, and it is expected to remain open until the end of September 2020.
Individual businesses that are able to secure private third-party investment to match the government funding, will be able to access convertible loans up to the value of £5m (the minimum loan amount being £125k.)
The amount provided by the government must be matched in full, as the Future Fund loan cannot constitute more than 50% of the total funding received by the company.
What are convertible loans?
A standard loan typically sees the principal amount plus any interest that has accrued during the lending period repaid over an agreed upon timescale. A convertible loan is different in that the repayment to the investor comes in the form of equity (shares) in the company.
Who is eligible?
You are eligible if your business:
- is UK based
- can attract the equivalent match funding from third-party investors and institutions
- has previously raised at least £250,000 in equity investment from third-party investors in the last 5 years
The government has also outlined that the funding must be used solely for working capital purposes (day-to-day trading), and cannot be used to repay any borrowings or make any dividend/bonus payments to staff, management, shareholders, or consultants.
If a company is deemed to be eligible, the government will undertake customer fraud, money laundering and KYC checks before any funding is provided.
This eligibility criteria is not exhaustive, and the government is expected to release a more comprehensive list of criteria in the next few weeks.
The Future Fund is not yet available to access, but it is expected to launch in May 2020. Further guidance and eligibility criteria will be released by the government in due course.
Please get in touch if you would like any further advice on the Coronavirus and government support.