Support for innovative companies

The Chancellor has announced a further £1.25 billion business package to support innovative new companies that are not eligible for coronavirus rescue schemes already available.

The government is set to launch a £500m co-investment fund for high-growth companies hit by the crisis with their venture capital backers, matching private sector money with state-backed loans.

Smaller research and development businesses can apply for a new pot of £750m in grants and loans through Innovate UK.

The government's new Future Fund will provide loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors, with the scheme being delivered in partnership with the British Business Bank.

The Government will initially make up to £250m available in total for the scheme, which is now open for applications and will continue until the end of September 2020.

Are you eligible?

To be eligible for a loan from the government under this scheme, a business must be an unlisted UK registered company that has raised at least £250,000 in aggregate from private third-party investors in previous funding rounds in the last five years.

Summary of Loan Characteristics

Here is a summary of what we currently know about this loan:

•    Loan range: £125k to £5m
•    Interest rate 8% pa, deferred until maturity, non-compounding - it can be set at a higher rate if a matched investor agrees a higher rate.
•    Loan term: 36 months
•    Must be matched with a private investment at least of same value, but there is no cap on the amount that a private investor(s) may put in
•    Loan will automatically convert to equity at next ‘qualifying’ funding round at a 20% discount with a ‘repayment right’ applied to accrued interest at a rate equal to a matched private investor.  
•    Qualifying future rounds are those that raise at least as much at the bridging loan.  
•    For non-qualifying rounds, conversion will occur at the discount rate applied to the price set by that round.  
•    At sale or IPO, conversion at the discounted rate set by most recent non-qualifying round may apply or it will be repaid in full with a 100% redemption premium (of the loan principal).
•    On maturity, repayment is due with a 100% redemption premium or an equity conversion at the discounted rate.
•    On a conversion following a sale, IPO or maturity, discount rate will only be applied to a non-qualifying round that occurred after the issue of the bridge funding.
•    Conversion equity will be made in the most senior class of shares in the company.
•    Loans and equity may subsequently by transferred by BBB to an institution investor.

Full details of the Future Fund eligibility criteria and application process is available by clicking here.