Expert Insights

Expert Insights

The Future Fund – FAQs

The Future Fund, a £250 million (and growing) fund to support high growth companies who may not be eligible for funding under other Government schemes is well underway.

 The Government’s Future Fund, which is aimed at innovative companies, was announced on 20 April 2020, as another strand to the wider package of financial support available for businesses in the UK affected by the Covid-19 crisis. Investments will vary between £125,000 and £5,000,000 and take the form of an unsecured convertible loan note.  The form of the convertible loan note is available here.  The rate of interest is 8% or such higher rate as agreed with the matched investors and the loans are for a maximum term of 36 months.

Whilst the initial fund set aside by the Government for the Future Fund was £250 million, this has since been expanded due to popular uptake and as of 30 June 2020, around £320 million has been advanced by the Government under this scheme. Despite this increase in available funding, applications will continue to be dealt with on a first-come, first-served basis and time remains of the essence for businesses looking to apply for funding from the Future Fund.

To be eligible for a loan under the Future Fund:

  • The business must be an unlisted UK registered company which was incorporated on or before 31 December 2019 (but companies incorporated outside the UK due to participation in Accelerator Programmes may also be eligible);
  • At least half or more of the business’s employees must be based in the UK and/or at least half or more of its revenues must be derived from UK sales;
  • The business must have raised at least £250,000 in equity investment from private third party investors in the last 5 years, prior to 20 April 2020; and
  • The business must be able to attract matched funding from third party investors and/or institutions – so the Government’s contribution comprises no more than 50% of the total funding.

A more detailed summary of the Future Fund is explored in our previous insight available here.  Below are some key FAQs for companies who may be interested in exploring whether the Future Fund is suitable for them.


  • How long is the Future Fund scheme available for?

The Future Fund scheme will initially be open for applications until 30 September 2020, but will be kept under review and may be extended.

  • How long will the application process take?

The Government’s latest guidance notes that it expects applications to take a minimum of 21 days from submission of the initial application through to the funding being provided.  It could of course take longer in practice and unlike some of other Government schemes a maximum suggested timetable has not been set.

  • Does the company need to have been negatively affected by the Covid-19 pandemic to be eligible for a loan under the Future Fund?

The eligibility criteria doesn’t require a company to be in distress, so as things stand, even if a company has no immediate runway concerns, it can still apply.

  • Our company entered into an advanced subscription agreement (ASA) with a third party investor before 20 April 2020, but the shares weren’t issued under the ASA to that investor until after that date. Can the ASA count towards the £250,000 equity investment required to have been raised in the last 5 years and prior to 20 April 2020?

No. The shares under the ASA would have also needed to be issued prior to 20 April 2020 to count towards the £250,000 requirement.

  • Can investments by directors and employees count towards the £250,000 equity investment requirement?

Executive directors and employees are not considered to be ‘third parties’ and will not count towards the £250,000 equity investment requirement. This does not apply to non-executive or investment directors, whose investments can count towards this £250,000 threshold.

  • Are there any criterion for those investors who wish to put up matched funding?

Investors who wish to put up matched funding must meet one of the seven eligibility criteria (essentially, they must be a high-net-worth investor, a sophisticated investor or an investment professional).

These investors also cannot be your spouse or civil partner, sibling, ancestor or lineal descendant, an existing majority shareholder, or companies controlled by any of the aforementioned people. Investments made by these groups of people will not count towards the matched funding requirement.

  • Can we qualify for funding if our matched funding has already been invested?

The Future Fund will not match previously closed funding rounds.

  • Our company is based in the UK, but the parent company is based outside of the UK. Will my company be eligible for a loan under the Future Fund?

If the company is part of a group, only the parent company of the group may apply for the loan. If the parent company is not a UK company, it (and the group) will only qualify for the Future Fund if its non-UK status is due to its participation in an Accelerator Programme and certain other additional criteria are fulfilled.

  • Our parent company is based outside of the UK and satisfies the additional Accelerator Programme eligibility criteria for a Future Fund loan. Is there a minimum amount of investment we must have received from the Accelerator Programme to qualify?

No, there is no minimum amount the Accelerator Programme must have invested to qualify for a loan under the Future Fund.

  • Can we apply to the Future Fund if we have already received a Coronavirus Business Interruption Loan (CBIL)?

Yes, as long as you satisfy the eligibility criteria for the Future Fund. The convertible loan will rank pari passu with the CBIL.

  • Will the company/matched investors be eligible for SEIS or EIS relief under a Future Fund loan?

As the matched funding is structured through the convertible loan note, the matched investors’ investment will not qualify for these tax reliefs.

  • Will a Future Fund loan affect previous SEIS or EIS investments when the loan converts into shares or is redeemed?

In short, no. HMRC has published draft clauses within the Finance Bill 2020 that will amend the EIS and SEIS regimes so that the redemption, repayment or conversion of a Future Fund convertible loan will not lead to a reduction or withdrawal of EIS/SEIS tax relief on a previous EIS/SEIS investment, nor will it disqualify the shares for EIS reinvestment relief.

  • Will the Future Fund constitute State Aid?

Our understanding from the latest guidance is that the Future Fund will not constitute state aid because it is being advanced on commercial terms.

  • Is there a limit on investment by the matched investors under the Future Fund?

Whilst there is a £5million cap on the Government investment, there is no requirement that any matched funding is similarly capped (so the aggregate of the Government funding and matched investor funding is uncapped). There is a 90-day ‘headroom period’ after entry into the convertible loan note agreement where existing or new matched investors can continue to invest into the company under the terms of the existing loan.

  • Is there a minimum investment requirement by the matched investors?

Matched investors must put up a minimum of £125,000 in aggregate, and the investor who leads the application process must commit to invest at least £12,500.

  • Are there any restrictions on the use of the loan proceeds?

Funding may be used for general working capital purposes, but not to repay borrowings from a shareholder, pay dividends, pay new bonuses to staff or management in the first twelve months, or in respect of the government loan, pay any advisory or placement fees or bonuses to external advisers.

  • What rights will the Government hold during the term of the loan?

The Government will have limited corporate governance rights, including rights to receive quarterly reporting information from the company during the term of the loan and as a shareholder following conversion of the loan.

  • When will the convertible loan note convert into shares?

There are four instances when the loan note may convert into shares: (i) on a qualifying funding round (where the company raises an amount at least equal to the aggregate bridge funding), (ii) a non-qualifying funding round (but only if the Government and a majority of the matched investors elect to convert), (iii) a sale or IPO, or (iv) when the loan matures.

  • Can there be a separate agreement with the matched investors that they will exercise their right to convert at a certain point in time?

There is no prohibition on such a side agreement, but the company and matched investors should be careful that this agreement will not adversely affect the Government’s economic interests under the loan.

  • When will the company be required to repay the loan?

There are a number of circumstances when repayment will be required – (i) on maturity, if the lenders elect to be repaid rather than for the loan to be converted into equity, (ii) on a sale or IPO, if the repayment and redemption premium will be higher than the proceeds of the sale received by the lenders, (iii) if the company defaults on the loan

If the Government determines that it would be prejudicial to its reputation to continue holding the loan it can require the loan to be repaid or require the company to buy back its shares in the company if the loan has already been converted. In these circumstances in either case the amount repayable or purchase price for the shares will be £1.00 in aggregate.

  • Can our company choose to repay the Future Fund loan before repayment is required?

No. Repayment will only be possible in the limited number of circumstances listed above.

  • What is the status of any further debt incurred by the company after taking out a loan under the Future Fund?

If the debt is bona fide and entered into on arms’ length terms with a person that is not an existing shareholder or a matched lender, that debt may be senior to the Future Fund loan. In all other cases, the future debt will need to be subordinate to the Future Fund loan unless the Government and a majority of the matched investors agree otherwise.

  • Can the company issue further unsecured loan notes or advance subscriptions?

Yes, but if the terms of those loan notes or advanced subscriptions are more favourable to the terms contained in the Government’s loan note, the more favourable terms will automatically apply to the Government’s loan note.

  • What is the procedure for applying to the Future Fund?

The third-party investor (or if there is a group of third-party investors, the lead investor in that group) will need to start the application process by certifying that they meet the eligibility criteria and provide key investment details to the British Business Bank (BBB) on their online portal. The company will then confirm the application details submitted by the third-party investor and submit a full application to the BBB. Once the application is approved, all parties will sign the convertible loan note in the template form provided by the BBB.

  • What should we do next if we want to apply to the Future Fund?

Companies wishing to apply to the Future Fund should liaise with their investors to obtain commitments in respect of the matched funding that is required and obtain any consents from existing investors and corporate approvals that may be required under any existing shareholders’ agreement and articles of association.  We recommend you consult a solicitor to help you prepare the documentation that will be required and to advise you in detail on the terms of the convertible loan and its effect on your company’s share capital position.

For more information on the Future Fund or assistance with applications, please contact Rebecca Burford or David Coates

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