New COVID-19 funding scheme for start-ups

The Government earlier this week announced the launch of the Future Fund, a new £250m funding scheme to support innovative companies facing financing difficulties following the COVID-19 outbreak.

The new scheme, delivered in partnership with the British Business Bank, will allow innovative companies access to convertible loans and will initially be open until September 2020.

If you do require assistance in navigating through the Future Fund scheme and your options, we would be delighted either to provide limited ad-hoc guidance without requiring any commitment from you or alternatively we would be delighted to support you in a more formal capacity.

Future Fund Scheme Highlights

Further details on the Future Fund scheme are still to be released by the Government but the known key features include:

• The Government will make unsecured bridge funding available alongside other private third party matched investment. The loan with constitute a maximum of 50% of the bridge funding being provided to the company, with the remaining amount provided by matched investors;
• The scheme covers facilities between £125,000 and £5 million;
• To be eligible, 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;
• The Government shall receive a minimum of 8% p.a interest to be paid on maturity of the loan and the loan will mature after a maximum of 36 months;
• The bridge funding should be used solely for working capital purposes and shall not be used by the company to repay any borrowings, make any dividends or bonus payments to staff, management, shareholders or consultants;
• The bridge funding will automatically convert into equity on the company’s next qualifying funding round at a minimum conversion discount of 20% to the price set by that funding round with a company repayment right in respect of the accrued interest; and
• A qualifying round is one where the company raises equity funding equal at least to the aggregate amount of the bridge funding. On a non-qualifying round, the bridge funding shall convert into equity at the discount price to the round (at the election of the holders of a majority or the principal amount held by the matched investors).

How we can help

We would welcome the opportunity of supporting your business during these difficult times either in securing a COVID-19 loan under the Future Fund scheme or assisting more generally in planning and responding to the current crisis to ensure business continuity. We are currently assisting a number of clients in securing additional borrowings including situations where we have stepped into existing loan application processes to expedite, enhance delivery or increase the lending quantum.

Please do not hesitate to contact us.

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