Future Fund

Contact Brian McMurray

or reach out to a member of our Business Advisory team.

*Please note this fund closed to new applications on 31 December 2020*


  • The Future Fund is being managed by the state-backed British Business Bank (“BBB”) and is scheduled to launch on 20 May 2020 and be open until the end of September 2020 (although the expectation is that the £250m fund will be depleted well in advance of that date).
  • The Fund will offer eligible businesses between £125k and £5m from the Government via convertible loan notes that will convert to shares on the next funding round, with private investors at least matching the Government commitment, but with no limit on matched investor amount(s) above that matched funding amount.
  • The matching funding must be on the same terms as the Government commitment (i.e. convertible loan notes), meaning that the investment on conversion of the loan note to equity will not qualify for EIS or SEIS relief (further details below).
  • There are no eligibility criteria related to a business being in distress or having cash flow issues.  All UK start-ups, as long as they meet the below criteria, should be able to benefit from the fund, provided they can obtain matched funding from private investors.
  • The Government have not set a limit to the maximum number of loans or companies that can access the Future Fund. Based on details announced (a minimum Government loan amount of £125k and an initial total fund of £250m), it means that a maximum of 2,000 companies could access the Future Fund – as different companies will likely seek to take larger amounts than the minimum available, the total number of loans is expected be far lower.
  • Applications for access to the Fund are investor lead, so businesses that are interested in proceeding with an application are required to speak to potential investors in the first instance.
  • Further details on the Future Fund and the application process can be found on the BBB website here.

Key Terms

  • The loans will automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if they are not paid – loans will mature after a maximum of 36 months.
  • A minimum of 8% per annum interest (non-compounding) is to be paid to the Government on maturity of the loan (not paid monthly or annually) – the interest rate will be higher if a higher rate is agreed between the company and the matched investors.  There is a repayment right, in the Company’s discretion, to choose to repay the accrued interest on conversion of the principal or convert to equity. Any accrued interest not repaid will convert to equity, but not at the discount rate (i.e. at full price).
  • For the funding received, there will be a minimum 20% conversion discount at the next “qualifying” funding round.
  • There will be no valuation cap, unless agreed by the company and matched investors.
  • The Government will have limited corporate governance rights during the term of the loan and as a shareholder following conversion of the loan.
  • The company will not be able to permit the creation of any debt that is senior to the Government loan, other than any bona fide senior debt from a funder that is not an existing shareholder or matched investor.
  • The Government has published the Convertible Loan Agreement (“CLA”), which includes further details on the minimum terms that it will insist upon, here.


Company :

  • To be eligible for a loan from the Government under this scheme, the business must meet the following eligibility criteria
    • Half or more employees are UK based; and / or
    • Half or more revenues are from UK sales
    • The company must have raised at least £250k in equity from third-party investors in previous funding rounds in the last five years (from 1 April 2015 to 19 April 2020, inclusive)
    • If the company is a member of a corporate group, it must be the ultimate parent company
    • The company does not have any of its shares or other securities listed on a regulated market, a multilateral trading facility, a recognised investment exchange and/or any other similar market, stock exchange or listing venue
    • The company must be a UK incorporated limited company
    • The company must have been incorporated on or before 31 December 2019
    • At least one of the following must be true for the company:
  • The funding shall be used solely for working capital purposes and shall not be used by the company to:
    • Repay any borrowings from shareholders or a shareholders related party (other than the repayment of any borrowings pursuant to any bank or venture debt facilities);
    • Pay any dividends or other distributions;
    • For a period of 12 months from the date of the relevant CLA, make any bonus or other discretionary payment to any employee, consultant or director of the company other than as contracted prior to the date hereof and as paid by the Company in the ordinary course of business; or
    • in respect of the Government loan, pay any advisory or placement fees or bonuses to external advisers.
  • Participating companies should seek advice in order to assess whether they meet the eligibility criteria and understand the full implications of participating in the Future Fund. Participating companies will also be required to nominate a solicitor and confirm that the solicitor is prepared to act and is able to receive and hold client funds.


  • The investor must fall within any of the following categories:
    • an “investment professional” within the meaning given to that term in article 19 of the FPO
    • a high net worth company, unincorporated associated or high value trust falling within article 49(2) of the FPO
    • a “certified sophisticated investor” or a “self-certified sophisticated investor” within the meaning given in articles 50 and 50A respectively of the FPO
    • a “certified high net worth individual” within the meaning of article 48 of the FPO
    • an equivalent professional, high-net worth, institutional or sophisticated investor in accordance with applicable law and regulation in such investor’s home jurisdiction
    • an association of high net-worth or sophisticated investors within the meaning of article 51 of the FPO
    • capable of being classified as a “professional client” within the meaning given in the glossary to the FCA Rules
  • Existing directors’ and employees’ investment to date does not count toward the £250k raised in previous funding rounds and will not be able to invest in a matched funding round.  Investment from non-executive and investment directors can count towards the £250k raised and will be eligible for match funding.

SEIS and EIS Relief

  • Convertible debt instruments do not meet current SEIS or EIS qualifying requirements, and as a result, an investor that wishes to make a matched investment alongside the Future Fund would not be entitled to the relevant tax relief that would be applicable on an SEIS or EIS qualifying equity investment. Investors would still benefit from the conversion discount, interest and redemption premium, should they make the matched investment.
  • Companies are able to complete both a convertible round (using the Future Fund) and an equity round, with SEIS or EIS investors participating in the latter and obtaining the relevant tax reliefs, subject to the investor and the company satisfying the relevant qualifying conditions.
  • If an investor held shares with existing SEIS or EIS relief and they wanted to participate in a convertible loan, the convertible loan would not of itself compromise that existing relief, subject to the investor and the company satisfying other qualifying conditions. However, if the convertible loan converts into shares (which do not qualify for SEIS or EIS relief), based on the current law that shareholder could not claim SEIS or EIS relief for a follow on equity investment. This is because a shareholder cannot receive EIS or SEIS relief on a future investment if they hold any shares that do not qualify for EIS or SEIS relief.


  • A “Lead Investor” must initiate an application on the platform in respect of the relevant Investee Company. An Investee Company (i.e. a company seeking investment) cannot initiate an application.
  • Once a Lead Investor has submitted an application, the Investee Company will receive an email with instructions on how to (i) proceed with opening an online account; and (ii) progress the application.
  • As this is not a matching service, each company seeking funding must have already identified investors to contribute the matched funding amount.

If you have any questions regarding the Future Fund, please contact Brian McMurray, or your usual AAB contact.

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