The Future Fund – convertible loans

On 20 May 2020, the government’s £500 million Future Fund opened for applications to help British businesses through the Coronavirus outbreak. The available funding is by way of loans where an amount of new investment into a company by investors is matched by the government. The amount of matched funds from the government ranges from £125,000 to £5 million.

The key features of the loans are:

  • They must not be used to

(a) repay any borrowings;

(b) pay any dividends;

(c) pay any bonuses;

(d) pay any advisory fees;

  • the loans will have a minimum of 8% per annum (non-compounding) interest;
  • the loan will mature after 36 months;
  • the loans are unsecured;
  • the loans will convert into shares in the company in certain circumstances, including an exit or a new funding round.

Eligibility criteria:

  • the company must have raised at least £250,000 in equity from investors in previous funding rounds in the last 5 years (from 1 April 2015 to 19 April 2020, inclusive;)
  • a new investment (for which the match funding is applied for) must be a minimum of £125,000;
  • for investors applying as a group, a minimum commitment of £12,500 is required by the leading investor completing the application;
  • the company does not have any of its shares or other securities listed on a regulated market;
  • the company must be a UK incorporated limited company on or before 31 December 2019;
  • at least one of the following must be true about the company:

(a) half or more employees are UK based; or

(b) half or more revenues are from UK sales;

  • the investor must fall within one of the prescribed categories:

(a) investment professional, or

(b) high net worth company, or

(c) certified sophisticated investor, or

(d) certified high net worth individual, or

(e) professional client.

An application process:

  • an application is made by an investor or a group of investors;
  • the investor (or a lead investor of a group of investors), certifies they meet the scheme eligibility criteria and provides key investment details;
  • the company confirms the accuracy of the investment application details provided, before submitting the full application;
  • it is a requirement of the scheme that the company has a nominated solicitor, who will facilitate completion and must be a UK regulated solicitor permitted to receive and hold client money.

The scheme is open for applications until the end of September 2020.

For help with an application, or advice on legal, tax or investment decisions please email us on BusinessSupport@wiltongroup.com, or contact your client relationship manager at Wilton.