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Coronavirus: the Government's Future Fund scheme has provided £512.9 million in funding so far - is your company eligible?
According to figures released this week by HM Treasury, a total of 816 applications have been made under the government’s Future Fund scheme which opened for applications on 20th May 2020. Under the Future Fund scheme, government funding is available to UK companies under a convertible loan facility on the basis that the government contribution, which is subject to a minimum of £125,000 and a cap of £5m for any single company, will match that of other lenders participating in the loan. The debt is convertible into shares in the company on future events including an equity capital raise, or an exit event.
The initial allocation of government funding to the scheme was £250m. It was reported that on the first day the scheme was open for applications, a total of £450m in government funding was applied for. This week, of the 816 applications made, 510 have been approved and total government funding of £512.9 m has been committed. The extent to which applications remain unapproved as a result of failure to satisfy the scheme’s conditions, or simply due to the processing time involved, is not clear. However, the government had originally indicated its expectation that applications would take a minimum of 21 days to process, so it is a reasonable assumption that many outstanding applications remain to be determined and have not been rejected.
Although the Future Fund scheme is proving popular, its take-up is dwarfed by the number of applications to date under the CBILS scheme (115,941) and under the Bounce Back loan scheme (1,349,051). In part this reflects the wider range of companies which are eligible under those schemes compared with those which could qualify under the Future Fund rules. It might also reflect the more complex rules and requirements which apply to the Future Fund compared with the CBILS and Bounce Back schemes. In addition, the inability of investment under the Future Fund convertible debt to qualify for the purposes of EIS will inevitably have reduced some investors’ appetite, and accordingly reduced the amount of available debt for growth companies which could be matched by government.
Notwithstanding these drawbacks, the Future Fund has attracted a great deal of interest and it is likely that the government funding commitment will eventually significantly exceed the original £250m cap contemplated. Rishi Sunak indicated soon after the scheme opened that the government would be likely to extend the scheme if demand for funding outstripped the initial fund contemplated.
The scheme remains open for applications until the end of September 2020.
In order to be eligible to claim support under the Future Fund scheme, a company must:
- be a UK-incorporated private company and, if a member of a group of companies, be the ultimate parent company
- have raised at least £250,000 in equity from third party investors in funding rounds between 1 April 2015 – 19 April 2020
- be UK-based, meaning that half or more of its revenues are generated from UK sales, or half or more of its employees are based in the UK
Investors who are participating in the convertible loan facility must also meet certain requirements. Although existing shareholders are permitted to participate, controlling shareholders (ie who already hold a majority of the issued shares in the company) are excluded, and accordingly a controlling shareholder will not be able to obtain matched funding for his/her investment.
Goodman Derrick advises companies and investors in relation to Future Fund applications.
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This guide is for general information on English law business to business contracts only and should not be relied upon as providing specific legal advice.