Future Fund the scheme to help UK startups during the coronavirus outbreak

Future Fund: the scheme to help UK startups during COVID-19

Linkilaw Legal News

As part of its ongoing efforts to support businesses that have been seriously affected by the coronavirus and the resulting economic fallout from global shutdowns, the UK government recently established the “Future Fund” and committed £1.25 billion to struggling startups.

The Future Fund is the latest in a series of tax and financial measures established by the UK government in response to the coronavirus pandemic. After announcing its first round of measures on 23 March, many companies—and startups in particular—found themselves ineligible for enrolment based on the criteria. In recognition of the importance of protecting the dynamic sectors of the UK economy that startups, scaleups and SMEs represent, the UK responded by establishing the Future Fund.

In this article, we’ll briefly tell you about the Future Fund and related grants and loans now available to startups, scaleups and SMEs, how the schemes will work and how to determine whether you’re eligible.

The plan for the bailout

The UK government’s bailout consists of two parts:

(1) the Future Fund, and

(2) related grants and loans for research and development.

First, under the Future Fund, the UK government will issue £500 million in loans to high-growth companies. Second, the UK has committed an additional £750 million in the form of grants and loans to small and medium-sized businesses focusing on research and development.

How the schemes will work 

Supplied both by the private sector and the government, the £500 million Future Fund is, essentially, a co-investment fund. As long as the cash is matched by private investors, the government will provide UK-based companies with between £125,000 and £5 million in convertible loans—loans which are converted to equity in the recipient company’s next qualifying funding round, or at the end of the loan if they are not repaid.

The UK has committed an initial £250 million to the fund (the other £250 million to be matched by private investors), but is leaving the door open to providing additional funding depending on the scheme’s success.

The £750 million in grants and loans for research and development will be available through the UK’s innovation agency, Innovate UK. The agency will expedite payment of £200 million of grant and loan  payments to existing Innovate UK recipients, provide existing recipients with an additional £550 million in increased support and offer £175,000 to 1,200 new recipients.

Both the Future Fund and the new Innovate UK grants and loans will become available in May 2020.

Eligibility

If your business can (1) attract the equivalent match funding from third-party investors and institutions, (2) has raised at least £250,000 in equity investment from third-party investors in the last 5 years, and (3) is based in the UK, then you would be eligible for the Future Fund scheme. Although applications are not available yet, you can view the guidelines and terms on the GOV.UK Future Fund page.

The research and development loans and grants available through Innovate UK are broken  down into smaller topic-specific competitions, each with their own requirements. You can review the active competitions on the GOV.UK Innovate UK page. The new coronavirus grants and loans will be posted in May.

Bottom line

Whether you’re just starting out or have an established SME, the impact of the current global and economic climate can make running your business even more stressful than usual. If you’re in a position to make use of these government-funded initiatives, it might be worthwhile—for both your business and for the UK’s future economic growth.

As always, please don’t hesitate to give us a call if you need some more guidance.

Future fund - call to action