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Government announces £250m coronavirus Future Fund for tech startups

The government has unveiled an initial £250m Future Fund scheme, issuing convertible loans to help startups struggling due to the coronavirus outbreak. The scheme is planned to go live in May.

20th Apr 2020
Staff Writer AccountingWEB
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The Chancellor Rishi Sunak appears on the BBC's Marr Show.

This morning, the government unveiled the Future Fund – a scheme that will issue convertible loans to high-growth tech startups suffering under the current crisis.

Under the new scheme, the government plans to make an initial £250m available in convertible loans, labelled as “bridge funding”, that will be available from May to September 2020. This is part of the £500m pledged investment for high-growth firms, and in addition to another £750m for SME’s focused on R&D, totals £1.25bn government support package announced today.

The government scheme, to be delivered in partnership with the British Business Bank (BBB), comes after pressure from big UK tech startups over being left out of coronavirus lending schemes.

Earlier this month, an open letter from 12 of the UK’s biggest tech startups was published, urging the Chancellor for lending schemes to be made available to high-growth tech companies. GoCardless, Deliveroo, Graphcore and Blockchain are amongst the leading UK tech scale-ups to sign. 

Save Our Startups (SOS) initiative, which includes a number of smaller tech startups, also published an open letter to the British Government to the same effect, the week prior.

Future Fund convertible loan 

As a convertible loan, the government funding will offer a short term, including interest, and the right for the government to convert the loan into shares in the company. The government is requiring Future Fund equity to offer “the most senior class of shares in the company” in a conversion event, whereby funding equal to the loan is secured.

If a further round of funding is required within six months of the conversion event, the government will then claim an ownership stake in the company. However, there is some confusion over these details as plans also state that the loan will convert into equity if the loan not repaid at the end of its term. 

According to Future Fund guidance, these convertible loans are aimed at “businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme.”

Who is eligible?

To be eligible for the Future Fund scheme, companies must be “an unlisted UK registered company” that has raised at least £250,000 in private funding within the last five years. Qualifying companies must also have “a sustained economic presence in the UK”. “This will immediately exclude some pure start-ups and fledgeling businesses who haven’t had such investment,” commented Blick Rothenberg partner Nimesh Shah.

But that isn’t all – eligible companies must acquire private investment to match the government funding. An additional set of terms accompany this, giving the government control over companies accepted for the loan.


Future Fund loans are subject to the following terms:

  • Funding will range from £125,000 to £5m
  • Interest will be set at a minimum of 8% per year to be paid at the end of the loan term, but will be higher if private investment funding is above 8%
  • The Future Fund loan scheme term will be a maximum of three years
  • The Government shall have limited corporate governance rights during the term of the loan and as a shareholder following conversion of the loan
  • Funding will be made alongside private investment and will make up no more than 50% of the overall amount.

According to the Chancellor, “Our start-ups and businesses driving research and development are one of our great economic strengths, and will help power our growth out of the coronavirus crisis.”

The scheme has been well-received by the tech startup ecosystem, along with concern over scheme’s complexity, which dictates the speed of its delivery. As we have seen with support packages such as CBILS, a delay in delivery will likely see startups fail before funding reaches them.

UK Future Fund follows startup packages announced by France and Germany’s governments in March, to the tune of €4bn and €2bn respectively.

Replies (1)

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Alastair Barlow
By Alastair Barlow
23rd Apr 2020 19:39

My understanding is any matching investor wouldn't be able to claim EIS under this scheme as it's a convertible loan rather than equity or ASA...

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