• Coronavirus: Future Fund convertible loan scheme

    As part of its package of measures to support business, the government has announced a new scheme to offer convertible loans to high growth innovative companies who are facing financial difficulties due to the COVID-19 outbreak.

     

    The new ‘Future Fund’ scheme will offer unsecured bridge government funding of up to 50% of the total bridge funding being received by a company, where the remaining amount is being provided by private third-party investors. The scheme may be a suitable option for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme.

     

    • The scheme will be open to companies who have a ‘substantive economic presence in the UK’ and have already raised at least £250,000 from third-party investors in the last five years.
    • The bridge funding will automatically be converted into equity on the company's next qualifying funding round, at a minimum conversion discount of 20% to the price set by that funding round.
    • The bridge funding must only be used for working capital and cannot be used to repay any borrowings, pay dividends or bonuses or, in respect of the government part of the loan, pay any advisory or placement fees or bonuses to external advisers.
    • The minimum amount of lending provided by the government under the scheme will be £125,000, up to a maximum of £5,000,000.
    • The minimum interest rate for the government will be 8% on a non-compound basis, with interest to be paid when the loan matures.
    • The loan will mature after a maximum of 36 months.

     

    The scheme is due to be launched in May 2020. It will initially be open until the end of September 2020 and will be delivered in partnership with the British Business Bank.

     

    Although the scheme is badged as applying to high growth innovative companies the information released to date does not include any detail on specific eligibility criteria related to innovation. Full and final details of the scheme are expected shortly.

     

    Links

     

    COVID-19: Government support tracker

    This tracker covers measures announced by the government to support individuals and businesses, as we get through COVID-19.

     

    External link

     

    Guidance: Apply for the coronavirus Future Fund

     

     

COVID-19: Future Fund convertible loan scheme - Updated: 23 April 2020

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