Government Future Fund to support innovative UK Companies announces Eligibility Criteria

Press release 18 May 2020

  • Open for applications from Wednesday 20 May
  • Scheme operates on a commercial basis to deliver an initial commitment of £250m of new government funding
  • Financing will be unlocked by additional third-party investment on a match funded basis
  • Applications submitted via an online platform based on a set of standard terms and eligibility criteria

The Future Fund, announced by the Chancellor of the Exchequer on 20 April, will open for applications from Wednesday 20 May. The Future Fund uses an online platform for applications, which today publishes its set of standard terms and eligibility criteria for borrowers, investors and solicitors to view in advance of Wednesday’s launch.

The full Convertible Loan Agreement, upon which all terms for a Future Fund investment are based, is also published today by HM Treasury.

The new Future Fund will support innovative UK companies with good potential, that are essential in ensuring the UK retains its world leading position in science, innovation and technology. These companies typically rely on equity investment and are currently affected by Covid-19.

Until now these companies have been unable to access other government business support programmes because they are either pre-revenue or pre-profit. The financing supports companies facing a significantly extended length of time between funding rounds, due to the impact of the current economic situation.

Developed by government and delivered by the British Business Bank, the Future Fund will help these companies through the current period of economic disruption and recovery, so they are able to continue their growth trajectory and reach their full economic potential.

Operating on a commercial basis, the Future Fund will deliver an initial commitment of £250m of new government funding which will be unlocked by additional third-party investment on a match funded basis, creating a bridge to the next equity funding round for innovative companies with good potential.

The Future Fund uses an online platform based on a recognised financial instrument, and a set of standard terms with published criteria. This allows investors to provide rapid support to the companies where they see good potential. Importantly, it provides a clear, efficient way to make funding available as widely and as swiftly as possible without the need for lengthy negotiations. The process is investor-led and the platform does not match companies seeking funding with investors.

How the Scheme Works

  • £125k-£5m government support: UK-based companies provided with between £125k and £5m in government support, with third-party investors at least matching the government commitment. This means the minimum loan to a company is £250k with no maximum, since there is no upper limit on the amount that additional investors may co-invest.
  • Broad range of third-party investors: A broad range of third-party investors can invest alongside government as part of the scheme.
  • Convertible loans: The Future Fund programme uses a recognised financial instrument known as a convertible loan. Unlike equity investment, there isn’t a requirement under the convertible loan to value the company or the price of its shares, at a time when company valuations have been significantly impacted by Covid-19. There is no requirement for a company to make regular repayments. Instead, the convertible loans are designed to convert into equity at the next funding round, when an equity value can be negotiated between companies and investors.
  • Investor-led: The Future Fund programme is investor-led. An application on the platform is initiated by a lead investor who will provide information about itself, other investors in the round and the company. If an application is successful, the platform will generate documentation for the company and all investors to sign. As this is not a matching service, each company seeking funding must have already identified investors to contribute the matched funding amount.
  • Self-certification: Companies will be responsible for confirming company information and reviewing the application before submission and as part of the legal documentation at completion of each Convertible Loan Agreement.
  • Role of the solicitor: as part of the scheme, companies appoint a company solicitor to facilitate the payment mechanics at completion of the Convertible Loan Agreement. It is anticipated that solicitors will be involved in the provision of legal advice to clients interested in the scheme.

Eligibility Criteria

  • Companies must be UK-incorporated and if part of a corporate group, only the parent company is eligible.
  • Companies in receipt of the loans will be required to have previously raised at least £250k in equity investment from third party investors in the last five years.
  • Only eligible companies that can attract at least 50% of third-party investment will receive funding.
  • Companies cannot have any of their shares traded on a regulated market, multilateral trading facility or other listing venue.
  • The company must have been incorporated on or before 31 December 2019
  • At least one of the following must be true for the company:
  • Half or more employees are UK based
  • Half or more revenues are from UK sales

How to Apply

Information, about the Future Fund, including standard terms and eligibility criteria, is available from Monday 18 May at the future fund product page. The Future Fund portal will open for applications on Wednesday 20 May.

PwC is supporting the British Business Bank in the implementation of the Future Fund.

Further Information

Notes to editors

Covid-19 Loan Schemes

Bounce Back Loans Scheme (BBLS)

BBLS is a demand-led scheme offering lending that targets small and micro businesses, providing loans from £2k up to 25% of the business’ turnover with a maximum loan of £50k. Providing lenders with a 100% government-backed guarantee, the standardised application form means a faster process with many loans becoming available within days.

The Bounce Back Loans Scheme enables businesses to obtain a six-year term loan at a government set interest rate of 2.5% a year. The government will cover interest payable in the first year.

Information on eligibility criteria and how to apply can be found on the British Business Bank website.

Coronavirus Business Interruption Loan Scheme (CBILS)

CBILS is delivered through more than 60 British Business Bank accredited lenders, and is designed to support the continued provision of finance to UK smaller businesses (SMEs) during the Covid-19 outbreak.

CBILS is a demand-led scheme offering lending to smaller businesses with turnover of up to £45m. The scheme supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities. Invoice finance and asset finance facilities are available from £1k to £5m, while term loan and revolving credit facilities are available from £50k to £5m (the lower limit for these has increased from £1k following the introduction of BBLS). The government makes a payment to cover interest and lender-levied fees under CBILS for the first 12 months.

Detailed information on CBILS can be found on the British Business Bank website.

Coronavirus Large Business Interruption Loan Scheme (CLBILS)

CLBILS is a demand led scheme targeted at larger businesses with a turnover of more than £45m. It offers term loans, revolving credit facilities, invoice finance and asset finance. Businesses with turnover between £45m and £250m can apply for facilities of up to £25m, while businesses with turnover of over £250m can apply for facilities of up to £50m.

Detailed information on CLBILS can be found on the British Business Bank website.

About the British Business Bank

The British Business Bank is the UK government’s economic development bank. Established in November 2014, its mission is to make finance markets for smaller businesses work more effectively, enabling those businesses to prosper, grow and build UK economic activity. Its remit is to design, deliver and efficiently manage UK-wide smaller business access to finance programmes for the UK government. The British Business Bank programmes are supporting more than £7.2bn of finance to over 93,000 smaller businesses (as at end of September 2019).

As well as increasing both supply and diversity of finance for UK smaller businesses through its programmes, the Bank works to raise awareness of the finance options available to smaller businesses:

The British Business Bank Finance Hub provides independent and impartial information to high-growth businesses about their finance options, featuring short films, expert guides, checklists and articles from finance providers to help make their application a success. The new site also features case studies and learnings from real businesses to guide businesses through the process of applying for growth finance.

As the holding company of the group operating under the trading name of British Business Bank, British Business Bank plc is wholly owned by HM Government and is not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). The British Business Bank operates under its own brand name through a number of subsidiaries, none of which are authorised and regulated by the FCA.

British Business Bank plc and its principal operating subsidiaries are not banking institutions and do not operate as such. A complete legal structure chart for British Business Bank plc and its subsidiaries can be found on the British Business Bank plc website.