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Future Fund – Further Government support for UK businesses

Published 21 April 2020

When will it apply?

The scheme is intended to run from May 2020 until September 2020

How much will be available?

Loans of between £125,000 and £5 millions will be made available provided the borrower can match the loan on at least an equal basis from a private sector source. A borrower may borrow more than 50% from the private sector if it wishes.

Who can apply?

Any UK registered business which has a substantive economic presence in the UK and which has raised at least £250,000 (in aggregate) from private third party investors in previous funding rounds in the past 5 years.

What can the money be used for?

The main purpose of the fund is to help pre-revenue businesses continue growing. Funding cannot be used for anything other than working capital.

How is it intended to work?

It is intended that the Government loan element will be a form of bridging finance for working capital which will either mature after a maximum of 36 months or if the borrower undertakes a qualifying funding round, such as raising equity capital, the bridging loan automatically converts into equity at a minimum conversion discount of 20%

How much will it cost?

If the loan reaches maturity the borrower can choose to pay back 100% of the loan plus a minimum interest rate of 8% per annum (non-compounding) or convert the loan to shares at a minimum 20% discount rate.

Important features to note

If the private sector borrowings have an interest rate higher than 8%, the Government borrowings must attract a matching higher interest rate as well.
Any new convertible loans issued on more favourable terms means these terms must then apply to the Government bridge funding.
The Government shall be entitled to transfer the loan or shares without restriction within the Government or, as part of a portfolio of at least ten future fund investments, sell the interest to any private institutional investor.

Authors

Neil Warwick

Newcastle

+44 (0) 191 404 4178

nwarwick@dacbeachcroft.com

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