The coronavirus pandemic has perturbed the global economy on a scale that is almost unprecedented. Business, more than ever before, and the Government are stepping in to save others from a similar fate—particularly startups. We review how the Fund works and how to apply for the coronavirus startup Future Fund.
What is the Future Fund?
The coronavirus Future Fund was developed by the Government in collaboration with the British Business Bank. It will lend government loans to UK-based companies whose net value ranges from £125,000–£5 million—and this is set to equal match funding from private investors. The Future Fund opens for applications on 20 May 2020.
These convertible loans will help those businesses that are heavily reliant on equity investment.
The Fund has also been designed with those businesses in mind that are unable to access the Government’s Coronavirus Business Interruption Loan Scheme (CBILS), or the Bounce Back Loan Scheme. These schemes are aimed at:
- Coronavirus Business Interruption Loan Scheme (CBILS) has been set up to support SMEs with an annual turnover of up to £45 million.
- Bounce Back Loan Scheme is 100% Government guaranteed and set up to support small businesses.
The Fund aims to support what the Government have termed innovative companies, early-stage businesses that have demonstrated potential for high growth, especially those with a focus on development and technology.
When will the Future Fund launch?
Businesses will be able to begin applying for the Future Fund on 20 May 2020.
The Government is committing an initial £250 million to the Fund and the scheme will operate until the end of September 2020 at the earliest, although this will be kept under constant review.
Will my business be eligible for the Future Fund?
In-depth details on eligibility criteria for the Future Fund are sparse at the time of writing, but what we do know is that, to qualify, your business must:
- be an unlisted UK-registered company
- have previously raised at least £250,000 in equity investment from third-party investors in the last five years
- demonstrate substantive economic presence in the UK
- attract the equivalent match funding from third-party institutions and private investors
- prove ineligibility for any other COVID-19-related government funding scheme
Finally, note that the Future Fund is part of the Government’s package of COVID-19 support measures, but there is not yet any requirement for applicants to produce a viable associated business plan or demonstrate that the pandemic has negatively impacted on their company.
How to apply for the Future Fund
To apply visit the gov.uk website for full details on how to apply for the Future Fund.
The Government are working around the clock to ensure as many UK SMEs as possible stay afloat. The Future Fund will enable businesses to access the capital they so desperately require during these exceptionally difficult and historic times. The loans will ensure fast-growing and dynamic firms across all sectors will be able to continue innovating and spreading prosperity.
How will the Future Fund work?
The funding provided to businesses by the Government will need to be used only for the purposes of working capital. Leveraging the loan to pay dividends or bonus payments, repay borrowings or pay advisory fees or bonuses to external advisers will be strictly prohibited.
The loan will bear interest at a minimum of 8% per annum, although this will increase if a higher rate is agreed between the business and a third-party investor. The term will stand at a maximum of 36 months.
There is presently no plan to implement a means by which borrowers would be able to repay the loan early. On initial public offering or sale of the business, the loan will either be repaid with a 100% premium or convert at a discount rate of 20%, depending on which alternative would produce greater funds for providers.
At present, the Government will exercise ongoing control rights as part of their investment in the businesses supported by the Future Fund. They will also have limited corporate governance rights for as long as they constitute a shareholder or lender in the company.
The specific rights actually envisaged in this scenario are currently unknown, but what is certain is that the Government will receive identical information rights to the company’s other investors.
What other support is available?
For guidance on the full government support in place for businesses, read our coronavirus business support guide.
Businesses that do have sufficient security at the moment, and would be accepted for credit without the help of the scheme, could compare and apply for a startup business loans to find suitable funding.
For more information on how to start applying for funding, take a look at our guide to preparing for a business loan.