Future Fund scheme launched for companies

30th June 2020


A new form of financial help for UK venture-backed companies was launched by the government on 20 May called the Future Fund. It is open until the end of September.

On 30 June it was announced that companies which have participated in accelerator programmes are now eligible for the scheme

Initial demand for the fund drained its £250m capacity within just one day, according to reports, so the Chancellor has provided more money to keep it going. More than 320 early-stage, high-growth firms have so far benefitted from £320 million of support through the Fund

The help is in the form of convertible loans ranging from £125,000 to £5 million to UK companies, subject to at least equal match funding from private investors.

As at 5 July 2020, £379m had been granted in convertible loans.

Funds under the scheme cannot be used to repay shareholder or related party loans (other than under any bank or venture debt facilities), pay dividends, pay bonuses or discretionary payments that are non-contracted or not in the ordinary course of business for 12 months, or pay advisory, placement or similar corporate finance type fees in relation to the convertible loan agreement.

The funding will automatically convert into equity on the company's next qualifying funding round

The scheme, delivered in partnership with the British Business Bank, is aimed at companies that cannot access the Coronavirus Business Interruption Loan Scheme and are more suited to equity investment.

The British Business Bank has published a series of FAQs about the Future Fund for investors.

Changes announced 30 June 2020

Participants in accelerator programmes are often required to set up a non-UK parent company in order to participate, which means some did not meet the Future Fund criteria of having a UK parent company when it opened for applications in May.

Accelerator programmes, such as TechStars or Y-Combinator, give businesses access to finance, mentorship and expert networks.

Now, UK companies who have participated in highly selective accelerator programmes and were required, as part of that programme, to have parent companies outside of the UK, can apply for investment.

Companies will still be required to meet the ‘substantive economic presence’ tests (that half or more employees are UK-based and/or half or more revenues are from UK sales).


The Chancellor said on 18 May that the scheme cannot be used in conjunction with the Enterprise Investment Scheme or SEIS as these are EU state aid schemes.

This means that co-investors cannot claim tax relief for their investment, something which could threaten appetite for the scheme, although clearly not at the moment as it has proved more popular than thought.

The government has, however, confirmed that existing EIS investments will not be affected (i.e. not be automatically withdrawn) where the convertible loan converts into shares. Also, where the convertible loan note redeems, the British Business Bank explained that government intends to make changes to the rules to clarify that this is compatible with SEIS and EIS.

In a government statement on 20 May, it said

"The government will also amend the rules of the Enterprise Investment Scheme, which provides tax relief to investors in high growth firms, to protect Future Fund investors from losing relief on their previous investments made prior to any investment through the Future Fund."

More details about the scheme can be found in the headline terms.


Investor-led process Matched funding Loan size Use of proceeds
The application process is investor-led. This means an investor, or lead investor of a group of investors, applies in connection with an eligible company.

Companies are still able to register their interest - see the Company page for information.
The Future Fund will match up to 100% of the amount provided by investor(s), up to a maximum of £5 million. The Future Fund loan amount provided to the company ranges from £125,000 to £5 million.

Amounts of Future Fund loans must be at least matched by co-investment from investors.
Funding must not be used to (a) repay any borrowings;(b) pay any dividends; (c) pay any bonuses; (d) pay any advisory fees.
Interest rate Term Conversion Standardised terms
The loans will have a minimum of 8% per annum (non-compounding) interest charge applied. This interest will be higher if the company and the investor(s) agree between themselves. Unlike a typical bank loan, the interest is not payable on a monthly basis and instead will accrue until the loan converts. At this point, the interest will either be repaid or convert in equity. The loan will mature after 36 months.

The loan cannot be repaid early by the company other than with the agreement of all of the investors.
The loans will convert into shares in the company in certain circumstances, including an exit or a new funding round. Investors and the Future Fund both invest using a convertible loan agreement, which is predefined and cannot be negotiated.


In order to be eligible for the scheme, each of the investor(s) and the company must meet specific criteria.

The investor must fall within any of the following categories:

  • an “investment professional” within the meaning given to that term in article 19 of the FPO
  • a high net worth company, unincorporated associated or high value trust falling within article 49(2) of the FPO
  • a “certified sophisticated investor” or a “self-certified sophisticated investor” within the meaning given in articles 50 and 50A respectively of the FPO
  • a “certified high net worth individual” within the meaning of article 48 of the FPO
  • an equivalent professional, high-net worth, institutional or sophisticated investor in accordance with applicable law and regulation in such investor’s home jurisdiction
  • an association of high net-worth or sophisticated investors within the meaning of article 51 of the FPO
  • capable of being classified as a “professional client” within the meaning given in the glossary to the FCA Rules

Note that all other investors must fall within one of the above categories in order for them to be eligible to invest in the convertible loan agreement. It is the responsibility of other investors to ensure they are eligible.

To be eligible for the scheme, the company must meet the following criteria:

  • The company must have raised at least £250,000 in equity from third-party investors in previous funding rounds in the last five years (from 1 April 2015 to 19 April 2020, inclusive)
  • If the company is a member of a corporate group, it must be the ultimate parent company
  • The company does not have any of its shares or other securities listed on a regulated market, a multilateral trading facility, a recognised investment exchange and/or any other similar market, stock exchange or listing venue
  • The company must be a UK incorporated limited company
  • The company must have been incorporated on or before 31 December 2019
  • At least one of the following must be true for the company:
    • Half or more employees are UK based
    • Half or more revenues are from UK sales

Investors and companies should note that the proceeds of the convertible loan agreement must not be used by the company to:

  • Repay any borrowings from a shareholder or a shareholder related party (other than the repayment of any borrowings pursuant to any bank or venture debt facilities);
  • Pay any dividends or other distributions;
  • For a period of twelve months from the date of the relevant convertible loan agreement, make any bonus or other discretionary payment to any employee, consultant or director of the company other than as contracted prior to the date hereof and as paid by the company in the ordinary course of business; or
  • Pay any advisory or placement fees or bonuses to any corporate finance entity or investment bank or similar service provider on monies advanced by the Future Fund.


Government Business Support website
Guidance on Government measures to support public services, people and businesses through this disruption.

Coronavirus Business Interruption Loan Scheme (CBILS) for smaller businesses
Guidance on how smaller businesses can apply for CBILS funding.

Coronavirus Large Business Interruption Loan Scheme (CLBILS)
Guidance on how larger businesses can apply for CLBILS funding.

Bounce Bank Loan Scheme (BBLS)
Guidance on how small and micro businesses, in all sectors, can access the BBLS scheme.

Research and Development

SMEs focusing on research and development will also benefit from £750 million of grants and loans through the Innovate UK’s grants and loan scheme.

Innovate UK, the national innovation agency, will accelerate up to £200 million of grant and loan payments for its 2,500 existing Innovate UK customers on an opt-in basis. An extra £550 million will also be made available to increase support for existing customers and £175,000 of support will be offered to around 1,200 firms not currently in receipt of Innovate UK funding. The first payments will be made by mid-May.

This package builds on the government’s existing support for innovative, high-growth firms including the £2.5 billion British Patient Capital fund, the upcoming £200 million Life Sciences Investment Programme, internationally competitive R&D tax reliefs and our major commitments to increase public R&D spending to £22 billion by 2024-25.

Further information about the Innovation Support Grants was published on 15 May.

Please check out the Business after COVID-19: Transition Knowledge Hub.

(Letters authorising the Future Fund)


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