The government’s £500 million Future Fund opened for applications on Wednesday, 20 May to secure investment to help them through the Coronavirus outbreak. Here’s what you need to know.
- The Future Fund is open to UK-based firms, that have previously raised at least £250,000 in equity investment from third parties in the last 5 years.
- They will also need to have investors to provide funding to be matched by the government, and have half or more of their employees based in the UK or generate at least half of their revenue through UK sales.
- The loans will convert to equity if not repaid.
- Companies can check they meet the criteria for funding by going to the British Business Bank website. If they have secured private match funding, one of their investors can register online to start the application process.
UK-based companies can now apply for a convertible loan of between £125,000 and £5m, to support continued growth and innovation in sectors as diverse as technology, life sciences and the creative industries.
The government has made an initial £250 million available for investment through the scheme and will consider increasing this if needed.
Private investors – potentially including venture capital funds, angel investors and those backed by regional funds – will at least match the government investment in these companies.
“The Future Fund will support firms across the UK to get through the pandemic by stimulating investment, so that they can continue to break new ground in technology and innovation,” the Chancellor of the Exchequer, Rishi Sunak, said.
The government will also amend the rules of the Enterprise Investment Scheme, which provides tax relief to investors in high growth firms, to protect Future Fund investors from losing relief on their previous investments made prior to any investment through the Future Fund.
The Fund will be open until September and is delivered in partnership with the British Business Bank.
Commenting on this, King & Spalding partner Marcus Young said it is absolutely worth considering an application, especially if you are in growth mode. “The Future Fund is investor-led and involves the government matching private funding raised by way of injection cash as a convertible loan note.”
“This means parting with some equity but could double funding raised in the market. With an initial £250 million fund, this is likely to be in high demand and applications competitive so be sure to demonstrate your SME’s innovation.”
Unlike CBILS and the Bounce-back loans, the company does not need to certify that it has been adversely affected by COVID-19 in order to apply to the Future Fund.
In addition to the Future Fund, Ministers have allocated £40 million through the Fast Start Competition to drive forward new technological advances, and to support innovative start-ups, including a virtual-reality surgical training simulator and an online farmers’ market platform. This will give companies a vital boost, fast-tracking the development of innovations borne out of the coronavirus crisis.
For many venture capital-backed businesses it will build the bridge from today’s severe challenges to the period of recovery, enabling them to survive then thrive, said Michael Moore, director general of the British Private Equity and Venture Capital Association (BVCA).
“The post-COVID economy is likely to look very different to today’s. The global leadership of venture capital-backed companies in the digital, high technology and life science parts of the UK economy will be critical to the UK’s success and this government support will help them to do that.”
Charlotte Crosswell, CEO of Innovate Finance, sees this as much-needed intervention from government to back high-growth businesses. Many FinTech companies have been unable to access the other loan schemes available, so this will provide vital funds to firms in the sector.
“In addition, the opportunity to export more of these products and services to overseas markets will showcase the unique innovation the UK has built and the role Fintech can play.”
Gerard Grech, CEO of Tech Nation said this is an important step to provide investment to pre-profit, pre-revenue businesses with a cash injection to get them through these challenging times.
From the investor perspective, Jenny Tooth OBE, CEO of UK Business Angels Association (UKBAA) believes that the Future Fund responds to the needs of innovating growth focused businesses that may have had investment from angel investors in their early growth stages and now have the capability to benefit from the support of a Convertible Loan alongside VC investment. “This will bring vital further finance to enable them to address the impact of the Covid-19 crisis and ensure their continuing ability to build and scale their business.”
Are you applying for the Future Fund? Share your experience with us.
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