The Future Fund pledges support to innovative businesses

On 20 April 2020, the UK Government announced a Future Fund to help innovative and dynamic companies, including engineering and manufacturing businesses, which have found it difficult to access other Government support packages, such as the Coronavirus Business Interruption Loan Scheme (CBILS).

As we detailed in our previous article, the current proposals indicate that matched funding will be available between £125,000 and £5,000,000, which is fantastic news for emerging companies and their investors. However, there is a gap between this news being released and the time that innovative companies will start receiving these funds. Therefore, companies are still advised to seek alternative sources of funding.

The information available is fairly limited and we await further information on the exact qualifying criteria for companies. However, this is clearly a step in the right direction, but like most announcements, the devil is in the detail and there are a number of provisions which will need further clarification.

Terms of Loan

The Government has set out some key conditions that will be attached to any convertible loan provided, including:

• Use of proceeds – “The bridge funding shall be used solely for working capital purposes…” and shall not be used to repay other debt and certain other costs.
• Conversion – the funding shall automatically convert into equity on the company’s next qualifying funding round at a minimum conversion discount of 20% to the price set by that funding round.
• Term and interest rate – the loan shall mature after a maximum of 36 months, with interest of 8% per annum paid on maturity of the loan.

Over the coming weeks the British Business Bank will announce more details of how it will operate and how businesses can apply. We will keep you informed as more information becomes available.

Ross Oliphant, Partner and Head of EQ Engineering & Manufacturing, comments,

“It’s great to see the Government coming up with innovative ways to support UK businesses who have found it challenging to obtain the support that is required. Many of our engineering & manufacturing clients have had to cut back operations with an uncertain future ahead of them, and this fund will be crucial in providing necessary funding to see them through. Engineering & manufacturing is a sector full of innovation, and a backbone to the UK economy so I am certainly glad to see further support for them on the horizon.”

In the meantime, EQ will be delighted to assist any business looking to apply for funds from this source or any of the other schemes. Please get in touch with your usual EQ contact or call one of our offices.