The Coronavirus Future Fund has been released by the government to support those businesses that are affected by the Coronavirus outbreak and finding it difficult to raise funds via the CBILS or standard banking facilities, typically businesses that rely on equity investment such as start-ups.
The scheme provides financial support across the UK to businesses offering a new support package of £1.25bn of support to the most dynamic sectors such as tech and life sciences and a further £750m will be made available to businesses carrying out research and development.
How it works – and how smaller businesses can benefit
Launching on the 20th May, the Coronavirus Future Fund will provide government convertible loans of between £125,000 and £5m to innovative companies.
Who is eligible
The current criteria is:
- You must be a UK-based business
- You must previously have raised at least £250,000 in equity investment during the last five years from 3rd party investors
- None of it’s shares can be traded on a regulated market, multilateral trading facility or their listing venue
- The company must have been incorporated on or before 31st December 2019
- And at least one of the following is true:
- half or more employees are UK-based
- half or more revenues are from UK sales
The application is an investor led process with an investor or lead investor of a group of investors applying in connection with an eligible company. Companies are able to register their interest via the British Business Banks website – here. The Future Fund will then match 100% of the amount provided by the investor(s), up to a maximum of £5m.
The loan will be made as a convertible loan with a minimum interest rate of 8% per annum, the loan will mature after 36 months. The interest can be more than this and will be agreed between the company and the investors. The interest is not paid monthly but will accrue until the loan matures at which point it can be paid or converted into equity. The loan cannot be repaid early by the company other than with the agreement of all the investors. The loan is made using a convertible loan agreement which is predetermined and cannot be negotiated.
Additionally, any business that successfully raises the funds from the scheme will be required to use the funding for working capital purposes, this means you can use it to:
- Repay any borrowed money
- Make any dividends or bonus payments to staff, management, shareholders or consultants
- Or to pay any advisory or placement fees or bonuses to external advisers
Please click here for further details and to find our if your business is eligible