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.