How to Apply for the Coronavirus Startup Future Fund

On 20 April 2020, the UK Government unveiled the Future Fund, a scheme designed to support startup businesses during the COVID-19 pandemic. How will it work—and will your company be eligible?

Nic Redfern Published on 01 May 2020. Last updated on 08 March 2021.
How to Apply for the Coronavirus Startup Future Fund

On 20 April 2020, the UK Government unveiled the Future Fund, a scheme designed to support startup businesses during the COVID-19 pandemic. How will it work—and will your company be eligible?

The coronavirus pandemic has perturbed the global economy on a scale that is almost unprecedented. Business, more than ever before, and the Government are stepping in to save others from a similar fate—particularly startups. We review how the Fund works and how to apply for the coronavirus startup Future Fund.

What is the Future Fund?

The coronavirus Future Fund was developed by the Government in collaboration with the British Business Bank and opened for applications on 20 May 2020. It will lend government loans to UK-based companies whose net value ranges from £125,000–£5 million—and this is set to equal match funding from private investors. These convertible loans will help those businesses that are heavily reliant on equity investment.

The Fund has also been designed with those businesses in mind that are unable to access the Government’s Coronavirus Business Interruption Loan Scheme (CBILS), or the Bounce Back Loan Scheme. These schemes are aimed at:

The Fund aims to support what the Government have termed innovative companies, early-stage businesses that have demonstrated potential for high growth, especially those with a focus on development and technology.

When did the Future Fund launch?

Businesses were able to begin applying for the Future Fund from 20 May 2020.

The Government committed an initial £250 million to the Fund and the scheme closed for applications on 31 January 2021.

Will my business be eligible for the Future Fund?

To qualify, your business must:

  • be an unlisted UK-registered company
  • have previously raised at least £250,000 in equity investment from third-party investors in the last five years
  • have been incorporated on or before 31 December 2019
  • attract the equivalent match funding from third-party institutions and private investors
  • show that either half or more of its employees are based in the UK, or that half or more of its revenues are from UK sales
  • prove ineligibility for any other COVID-19-related government funding scheme

Finally, note that the Future Fund is part of the Government’s package of COVID-19 support measures, but there is not yet any requirement for applicants to produce a viable associated business plan or demonstrate that the pandemic has negatively impacted on their company.

How to apply for the Future Fund

The Future Fund scheme was designed by the Government and is delivered by the British Business Bank. This scheme closed for new applications on 31st January 2021.

How will the Future Fund work?

The funding provided to businesses by the Government will need to be used only for the purposes of working capital. Leveraging the loan to pay dividends or bonus payments, repay borrowings or pay advisory fees or bonuses to external advisers is strictly prohibited.

The loan will bear interest at a minimum of 8% per annum, although this will increase if a higher rate is agreed between the business and a third-party investor. Unlike a typical bank loan, the interest is not payable on a monthly basis and will instead roll up until the loan matures, at which point the interest will either be repaid or converted into equity. The term will stand at a maximum of 36 months and the loan cannot be repaid early by the company other than with the agreement of all of the investors.

On initial public offering or sale of the business, the loan will either be repaid with a 100% premium or convert at a discount rate of 20%, depending on which alternative would produce greater funds for providers.

At present, the Government will exercise ongoing control rights as part of their investment in the businesses supported by the Future Fund. They will also have limited corporate governance rights for as long as they constitute a shareholder or lender in the company.

The specific rights actually envisaged in this scenario are currently unknown, but what is certain is that the Government will receive identical information rights to the company’s other investors.

What other support is available?

For guidance on the full government support in place for businesses, read our coronavirus business support guide.

Businesses that do have sufficient security at the moment, and would be accepted for credit without the help of the scheme, could compare and apply for a startup business loans to find suitable funding.

For more information on how to start applying for funding, take a look at our guide to preparing for a business loan.

About the author:

Finance Director at NerdWallet UK and business adviser to SME's Nic is spokesperson for small and growing businesses with a strong understanding of the financial needs of business Read more

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