The information on this page was last updated on 24th September 2020.

Following the Chancellor’s announcement on 24th September, applications for the Future Fund have been extended until the 30th November 2020. 

The Future Fund will support innovative UK companies that are essential in ensuring the UK retains its world-leading position in science, innovation and technology.

The fund opened for applications using an online platform on Wednesday 20 May. Since launching, demand has been very high, and further details about the scheme, including the application process have become available.

Developed by government and delivered by the British Business Bank, the Future Fund will help support companies that would usually rely on equity investment, but which face a significantly extended length of time between funding rounds, due to the impact of the current economic situation.

These companies have been unable to access other government funding support because they do not meet traditional lending criteria.

How it works

Financial support will be provided by an initial commitment of £250m of new government funding, subject to at least equal match funding from third-party investors. This will aim to support innovative companies with good potential until the next equity funding round.

The fund will offer convertible loans of between £125,000 and £5m which are designed to convert into equity at the next funding round, at which point an equity value can be negotiated between companies and its investors. Under the convertible loan, there is no requirement to value the company or the price of its shares, or for a company to make regular repayments.

Eligibility criteria

  • Companies must be UK-incorporated and if part of a corporate group, only the parent company is eligible
  • Applicant companies must have previously raised at least £250k in equity investment from third party investors in the last five years
  • Companies must attract at least as much third-party investment as government funding
  • Companies cannot have any of their shares traded on a regulated market, multilateral trading facility or other listing venue
  • 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.

Convertible loan terms

The terms of the loan are largely non-negotiable. The only negotiable terms are:

  • Interest rate at a minimum of 8%
  • Conversion discount rate at a minimum of 20%
  • Permission for investments on the same terms – which may be made within 90 days of the Future Fund’s investment (but such amounts will not be matched by the Future Fund)
  • A valuation cap, which may be added if agreed between the company and the investors, and which must also apply to the loan made by the Future Fund


Any proceeds cannot be used to:

  • Repay borrowings from a shareholder or related party
  • Pay any dividends or distributions
  • Make a bonus or discretionary payment to an employee or officer of the company for a period of 12 months from the date of the convertible loan agreement. Any payments contracted before the agreed date are exempt.
  • Pay advisory or placement fees or bonuses to a corporate finance entity, investment bank or similar provider

Application process

A lead investor (that meets specific eligibility criteria and that must provide a minimum of £12,500 of the investors’ funding) should make the initial application for matched funding online. It will need to provide details of all other investors seeking to make a matched investment, alongside detail of their proposed investment, when submitting the application. Full details of the information needed from the lead investor can be found here.

The  company will then check the investor data in the application, and provide additional information – which can be found here.

Once the application is approved, the company and investors will receive the (standardised) convertible loan agreement. In order to complete, the following will need to be sent to the British Business Bank:

  • The convertible loan agreement signed by all other parties
  • A signed director’s certificate
  • A solicitor’s confirmation letter from the company’s nominated solicitor.

Further information about the Future Fund can be found here.

Here at Smith Cooper Corporate Finance, our team of specialist advisors are on hand to help you make sense of the types of funding options available to companies and how best to access them. If you require assistance, please don’t hesitate to get in touch.