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Future Fund Updates

A month or so ago, I published my thoughts on the Future Fund. Following a period of deliberation and degree of criticism of the scheme from various segments of the funding community, the key documentation has now been published.  It is this documentation that companies and investors will have to sign up to in order to obtain the matched-funding from the Future Fund. 

Those working closely with Angel investors, entrepreneurs and high growth companies hoped that during this period of deliberation, some tweaks would be made to the scheme to address some of the concerns i.e. that the structuring of the support was focused too heavily on the venture capital end of the market and was incompatible with EIS and SEIS.

The following is not exhaustive but here is what we now know for sure:

  • matched funding must be via a convertible loan and so a hybrid of part convertible loan and part equity investment will not work with this scheme;
  • previous funding doesn’t qualify as matched-funding;
  • if the investee company is part of a corporate group, it must be the ultimate parent company i.e. ‘topco’;
  • shares in the investee company must not be traded on a regulated market, multilateral trading facility or other listing venue;
  • investee company must have been incorporated on or before 31 December 2019;
  • either half or more of the investee company employees must be UK based or half or more of its revenues must be from UK sales;
  • inclusion of Enterprise Capital Funds has been deemed not to breach EU state aid rules and so potentially substantially expands the number of companies which can seek money from the Future Fund; and
  • investee companies cannot choose to repay the loan (the loan will convert into shares or be repayable in certain circumstances e.g. an exit/maturity of the loan/event of default).


Those lobbying on behalf of the SEIS/EIS community have been assured that SEIS/EIS co-investors who forgo EIS reliefs in a Future Fund round will not have their previous and future reliefs prejudiced but this requires a change to the applicable rules which we understand the Government intends to make.     

The application process

Applications are open Wednesday 20 May 2020 and will be on a first come, first served basis.

Assuming that you have investors lined up, the process is designed to be swift and hopefully relatively pain free.  The investee company’s lead investor will drive the initial application process.  Once the application is made, the investee company will have to provide and verify information as part of the later stages of the application process.  It will take a minimum of 21 days from the initial application to the funding being awarded.      

From an initial review of the convertible loan agreement which has just been made available, the structure is fairly straightforward but the devil is in the detail.  The convertible loan agreement is provided on a ‘take it or leave it’ basis so there is no negotiation which is what often eats into the funding timetable. 

The completion process

The guidance on the British Business Bank (“BBB”) website sets out a prescribed process for completion. If an application is successful, a director of the investee company will be required to sign a standard form declaration (the “Director’s Certificate”) which will include confirmation that the investee company meets certain criteria e.g. previously raised at least £250,000 in equity from third party investors in previous funding founds in the last 5 years (1 April 2015 to 19 April 2020).  The BBB will also require a confirmation from the investee company’s solicitor (the “Solicitor’s Confirmation”). 

Once the Director’s Certificate, the Solicitor’s Confirmation and the convertible loan agreement are signed by the relevant parties, the Future Fund will then sign and date the fully executed convertible loan agreement and release it to the investee company.  Once this step happens, the Future Fund will send the completion monies to the investee company’s lawyer who can then transfer to the investee company.

The Future Fund is not for every company.  There will be some companies that meet the eligibility criteria but decide that, on balance, the cost of the matched-funding is too high.  Those companies that can afford to do so will try to sit tight or access cash quickly in other ways.  At MBM, we are here to help you navigate the Future Fund application process and help you assess whether this is right for you.  If you have any questions on the eligibility criteria, application process or anything else, please get in touch – we’d love to chat! 

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