The Government has made £250 million available for the Future Fund, and will keep this amount under review. The scheme is initially open for applications from 20 May until the end of September 2020.
How it works
- The investor, or 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.
Contract is finalised:
- In the case of approved applications, all parties will execute an agreement (in the template form provided) and satisfy certain conditions set out in the agreement before the funds are released.
Key features of the scheme
|Interest rate||Term||Conversion||Standardised terms|
|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.||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.
|The loans will convert into shares in the company in certain circumstances, including an exit or a new funding round.||Investors and the Future Fund both invest using a convertible loan agreement, which is predefined and cannot be negotiated.|
In order to be eligible for the scheme, each of the investor(s) and the company must meet specific criteria.
The investor must fall within any of the following categories:
- an “investment professional” within the meaning given to that term in article 19 of the FPO
- a high net worth company, unincorporated associated or high value trust falling within article 49(2) of the FPO
- a “certified sophisticated investor” or a “self-certified sophisticated investor” within the meaning given in articles 50 and 50A respectively of the FPO
- a “certified high net worth individual” within the meaning of article 48 of the FPO
- an equivalent professional, high-net worth, institutional or sophisticated investor in accordance with applicable law and regulation in such investor’s home jurisdiction
- an association of high net-worth or sophisticated investors within the meaning of article 51 of the FPO
- capable of being classified as a “professional client” within the meaning given in the glossary to the FCA Rules
Note that all other investors must fall within one of the above categories in order for them to be eligible to invest in the convertible loan agreement. It is the responsibility of other investors to ensure they are eligible.
To be eligible for the scheme, the company must meet the following criteria:
- The company must have raised at least £250,000 in equity from third-party investors in previous funding rounds in the last five years (from 1 April 2015 to 19 April 2020, inclusive)
- If the company is a member of a corporate group, it must be the ultimate parent company
- The company does not have any of its shares or other securities listed on a regulated market, a multilateral trading facility, a recognised investment exchange and/or any other similar market, stock exchange or listing venue
- The company must be a UK incorporated limited company
- 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
Investors and companies should note that the proceeds of the convertible loan agreement must not be used by the company to:
- Repay any borrowings from a shareholder or a shareholder related party (other than the repayment of any borrowings pursuant to any bank or venture debt facilities);
- Pay any dividends or other distributions;
- For a period of twelve months from the date of the relevant convertible loan agreement, make any bonus or other discretionary payment to any employee, consultant or director of the company other than as contracted prior to the date hereof and as paid by the company in the ordinary course of business; or
- Pay any advisory or placement fees or bonuses to any corporate finance entity or investment bank or similar service provider on monies advanced by the Future Fund.
Read more via the British Bank website here