SUPPORTING BUSINESS GROWTH
Updated 19 November 2020
The treasury has launched the Future Fund to provide support for the UK’s high growth start up businesses. The government will issue convertible loans between £125,000 to £5m to innovative companies facing financing difficulties due to the pandemic.
Does your business rely on equity investment?
What do you need to know…
- The government will issue a loan between £125,000 and £5m as long as it is matched on a pound for pound basis by private equity investment
- The loan will automatically convert to the most senior equity (at a discount of 20%) at the next equity round
- If a qualifying round does not occur within the 36m maximum term, it is up to the government and the investors as to whether the loan is repaid at a premium or converted to equity at 20% discount
- If you issue more convertible debt after you have benefitted from the Future Fund, at more favourable terms, the governments terms have to be improved to match
- Future Fund will be open for applications until 31 January 2021
Eligibility criteria for the business
- Business is based in the UK, and have at least…
- Half or more employees based in UK or 50% of revenues derived from UK sales
- If part of a group, the qualifying business must be the ultimate parent company
- Must be an unlisted company
- Can attract the equivalent match funding from third-party private investors and institutions
- Has previously raised at least £250,000 in equity investment from third-party investors in the last 5 years
The Convertible Loan must not be used to Repay any borrowings from a shareholder; Pay any dividends, bonuses or advisory fees within 12 months of the loan issue.
How to apply…
This is an investor led scheme, with the lead investor being responsible for checking eligibility and making the application. Further details are available on the British Business Bank website. Essentially, it is a 3 part process:
• Lead investor applies by creating an account on the British Business Bank website
• Investor provides information regarding the investment and confirms eligibility
• Completed application is submitted and eligible business confirms it is happy for the application to be submitted
Provided the investment matches the eligibility criteria for both the company and the investor, the funding will be made available via the Convertible Loan Agreement.
As ever, Adams O’Rourke are here if you need any further assistance regarding Covid-19 business support.
Click here to get in touch with us.
Take care everyone!