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FUTURE FUND – MATCHED LOAN SCHEME FOR INNOVATIVE COMPANIES

COVID-19 Future Funds

Friday, 29th May 2020

The Chancellor announced on 20th April 2020 that he would be introducing a Future Fund to help high growth and Innovative companies. This was made available on 20th May 2020.

The scheme will issue convertible loans between £125,000 to £5 million to innovative companies which are facing financing difficulties due to the coronavirus outbreak.

The loans will be subject to at least equal match funding from private investors.

These convertible loans may be a suitable option for businesses that rely on equity investment and are unable to access other government business support programmes.

The scheme will be delivered by the British Business Bank and will be open to applications until 30th September 2020.

Eligibility

You will be eligible if your business:

  • is based in the UK
  • 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
  • its shares are not traded on a regulated market, multilateral trading facility or other listing venue
  • was incorporated on or before 31st December 2019
  • at least one of the following are true:
    • half or more employees are UK-based
    • half or more revenues are from UK sales

The intention is to help companies that have been reliant on equity funding and do not qualify for CBILS, to bridge them until their next equity funding round

HMRC has released an online eligibility checker – select HERE to find out if your business could be eligible.

What is the Funding?

The Future Fund will provide matched loans with automatic conversion into equity at the next equity round or on maturity repayment subject to a redemption premium or conversion into equity.

What are the Interest Rates?

Minimum 8% pa paid on maturity, higher where private investors agree higher rates for the matched funding.

What can the funds be used for?

The funding must be used solely for working capital.

The funding cannot be used to:

  • Repay any borrowings
  • Pay dividends
  • Pay bonuses to anyone
  • Pay any advisory or placement fees (in respect of the Government loan) to external advisers.

When do the loans convert into equity?

The loans will convert into shares in the company in certain circumstances, including an exit or a new funding round which is in aggregate equal to the total loan (Government and private investor monies). The accrued interest can be repaid separately.

What price is the conversion?

A minimum 20% discount to the price set in the funding round, or greater if agreed with matched investors.

What happens on maturity?

The loans will mature after 36 months. On maturity they can either be:

  1. Repaid with a redemption premium – 100% of the principal amount; or
  2. Converted into equity at a 20% discount to the most recent funding round.

How can Onyx help?

We would strongly recommend speaking to your bank first to understand all options available to you.

If you would like us involved, then we will support you during your bank meeting and throughout the application process.

Are your accounts and management information up to date? If not then we can help to bring your accounting affairs up to date.

You will need up to date year end accounts and management accounts in order to ensure your application is processed swiftly taking advantage of this measure.

We can prepare cashflows to show how the extra funding will be used and the forecasts for repayment.

GET IN TOUCH WITH ONYX

If you have any queries, or want to discuss further, please give us a call us or e-mail us at  enquiries@onyxaccountants.co.uk for a FREE no obligation consultation.

Got any questions or queries? Our friendly team are happy to help. Just drop us a line! Call us on 0121 753 5522 or 01902 759 800.