Future Fund – still open for applications

The Future Fund is still open for new applications to the British Business Bank.

Here are some things you should know if you are thinking of applying;

The Future Fund has an initial pot of £250m available for co-investment as convertible loans.  The budget of the scheme will be reviewed by Treasury, but has not been extended as yet.  Match, as a convertible loan, is available between £125k and £5million.

Applications have to be investor-led.  Companies cannot apply to the Future Fund directly.  To be successful, you need a full suite of investors and you need to provide information on all investors participating in the round.

You have to have a solicitor, identified as part of the application, who will hold the funds.  All match funding must be available at application.

Be aware that any requests for further information from the British Business Bank will go to the applying investor and not the company, so you need to ensure that you have effective communication in place with the lead investor.

The Future Fund is not compatible with EIS, however this does not mean that investors who usually use EIS are unable to participate in a round.  They can invest; however they will not be able to use their EIS reliefs.  Our view – this is a big disincentive to early-stage investors and means that Angels are unlikely to want to participate.

Any investor who is a ‘connected person’ from a company law perspective cannot participate in the round.  This means anyone who owns > 50% of company, at the time of application, or > 50% of the voting rights.

Other things to know –

• Enterprise Capital Funds (ECFs) can be used at match funding
• Regional investment funds can be used as match funding too
• There is no cap on the investment round, but the match funding is capped at £5m. ‘Headroom’ investment can be made by investors above the £5m but this has to be on the same terms as all other investors.
• If new investors want to join the round after the match has been received, you need to make a new application to the fund, if you want their investment to be matched.
• The 20% discount rate within the terms of the loan refers to future rounds of investment.

You can find more information from https://www.gov.uk/guidance/future-fund