The Future Fund has launched

Wednesday 20th May, 2020

Today, on Wednesday 20 May 2020, the UK Government’s Future Fund has officially opened its doors. With applications being processed on a “first come, first served” basis and a pot of £250 million Government funding available, we will get straight to the important points that you need to know:

What funding is available?

The Government will pull from a total pot of £250 million (which will be kept under review) to invest convertible loans in UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors.

The Government will match up to 100% of the amount provided by investors, up to a maximum of £5 million. There is no cap on the amount that the matched investors may loan to the company.

What are the main terms of the convertible loans?

  • Conversion: The loan will convert into shares in the company in certain circumstances, including an exit or a new funding round. The conversion discount is 20%.
  •  Interest: The loan will have an interest rate of 8% per annum (non compounding), which will not be payable monthly but will instead accrue until the loan converts.
  •  Term: The loan will mature after 36 months if it has not converted beforehand. It cannot be repaid early by the company without the agreement of all investors.

How do you apply?

The investor, or lead investor of a group of investors, must make the application online through the Future Fund portal, which will be approved by the company. The information to be submitted with an application is listed in the links provided below. A minimum 21-day period is expected from submitting the application to funding, if successful.

What has changed since the release of the initial heads of terms?

The Government has provided further detail and responses to the questions that were raised by the release of the initial heads of terms some weeks earlier (which we reviewed: here):

Company eligibility

  • We now know that the requirement for companies to have a “substantive economic presence in the UK” means that the company must have either (i) half or more employees that are UK based; or (ii) half or more revenues that are from UK sales.
  • The requirement for companies to have previously raised at least £250,000 in the last five years relates only to funds raised specifically between 1 April 2015 to 19 April 2020, inclusive.
  • The company must have been incorporated on or before 31 December 2019.
  • We were concerned that the Future Fund would exclude companies in the space that have the vast majority of their business in the UK but have a US or other jurisdiction parent company (which is not uncommon). This remains the case as it is maintained that the company must be a UK incorporated company and if the company is a member of a corporate group, it must be the ultimate parent company. (This may be because of state aid rules.)


  • It is still not known how the amount of funding per company is to be determined, or what specific measures are in place to assess the extent to which eligible companies meet the Future Fund’s target audience, being “innovative UK companies” with “good potential”, that “typically rely on equity investment” and are “currently affected by Covid-19”. It appears that companies will be assessed on completion of an application to the Fund. As part of the application process, the Government states that it will collect information about the company and will use the information to ensure that they are allocating funds fairly through the Future Fund scheme.
  •  We now know that the Future Fund and investors will both invest using a convertible loan agreement (“CLA”). The CLA is a fixed, standard form document and generally not negotiable. However, certain terms of the CLA including the interest rate, conversion discount, headroom amount and valuation cap are negotiable between the investor(s) (other than the Future Fund) and the company in advance of application, provided that the interest and discount rates cannot be lower than 8% and 20% respectively. If no headroom amount or valuation cap is agreed, they will default to zero and void, respectively.
  • The Government does not match retrospective funding. The Future Fund requires third party investor(s) to be known and lined up for an application to be made. The investor or lead investor completing the application, is required to provide details of the total amount of funding proposed to be raised under the CLA, along with contact details and amounts to be invested by all other investors (where applicable).
  • Once the CLA has been signed, there is a 90-day window in which additional investors can make further loans to the company on the same basis as the CLA, up to a headroom amount agreed in the CLA by the investors and the company. These further loans will have to be arranged between the relevant company and further investors outside of the portal and the relevant company will notify the Future Fund of the outcome. These additional loans do not qualify for matched funding from the Future Fund.
  • Investors are being encouraged to sign up the Investing in Women Code: here.

State Aid

  • The CLA is not EIS or SEIS compatible and therefore investors providing matched funding cannot benefit from these schemes.
  • Companies that have received other types of Government aid related to COVID-19 are not excluded from applying to the Future Fund.

Further information

For companies:

  • Further information on eligibility criteria and applying can be found: here
  • FAQs can be found: here

For investors:

  • Further information on eligibility criteria and applying can be found: here
  • FAQs can be found: here

A copy of the draft convertible loan note agreement can be found: here

For any advice in relation to the Future Fund, please get in touch.


This article is current as of the date of its publication. The information and any commentary contained in this article is for general information purposes only and does not constitute legal or any other type of professional advice.  Marriott Harrison LLP does not accept and, to the extent permitted by law, excludes liability to any person for any loss which may arise from relying upon or otherwise using the information contained in this article.

Articles by Kerry Corrigan