The Government’s Future Fund has now opened its door to applications.

This £500 million co-investment fund (£250 million of which will be provided by the Government, with the other half of the fund coming from the private sector) will make available convertible loans of between £125,000 and £5 million to qualifying high-growth UK companies.

Our initial summary of the Future Fund can be found in our article on Challenges and Opportunities for Tech Startups, available here.

When the Future Fund was first announced and its associated term sheet published, a number of our clients raised specific questions and issues.

Thankfully many of these have now been definitively answered, including:

Will the convertible loan agreement be SEIS or EIS eligible?

As we suspected, the Government has now confirmed that it will not be.

Will entering into the convertible loan agreement affect the SEIS or EIS compatibility of prior investments into the same company?
The Government has confirmed that such previous investments will not be affected where the convertible loan converts into shares. Where the convertible loan is redeemed for cash, it seems that the Government is intending to make changes to the existing rules to clarify that this is compatible with such previous investments.

What is the exact date range when companies must have previously received £250,000 in third party equity investment?

The Government has confirmed that this must have been in the five year period between 1 April 2015 to 19 April 2020 inclusive.

Can a founder’s own investment count towards the previous £250,000 investment and can they count as matched funders?

The Government has confirmed that any previous investment from founders, employees, workers or consultants (or any of their connected parties) does not count towards the £250,000 and cannot form part of the matched funding, albeit investment from NEDs or investor directors can count towards the £250,000 raised and be eligible for matched funding.

Would advance subscription agreements (ASA’s) qualify as matched funding?
The Government has confirmed that existing ASA’s do not qualify as matched funding, nor do they qualify as equity raised previously until they have converted into shares.

What is the required nexus to the UK?
The company must be registered in the UK and employ at least half of its employees in the UK or generate at least half of its revenue from UK sales. Investors can be based abroad.

What governance rights will the Government have over my company going forward?

The Future Fund can request a meeting with the company prior to a conversion event to discuss in good faith the governance rights that the Future Fund may have following the conversion event. However, it is clearly stated that there are no obligations to agree to such governance rights. The Government also has robust information rights, including rights to a quarterly report.

Will lawyers need to be involved?

Yes, it is a condition of the scheme that companies appoint a firm of solicitors to facilitate the process and receive the funds from private lenders and the Future Fund.

In terms of some of the other key developments:


  • The application is initially driven by a lead investor through this portal on the website of the British Business Bank, which is operating the scheme in conjunction with the Government. The lead investor must put in at least £12,500 personally and will need certain information about the company to-hand when applying, as summarised here. Once this initial submission has been made, the company will be required to progress the application.
  • Applications will be processed on a ‘first-come, first-served’ basis to eligible applicants. The Chancellor previously stated that the scheme could be extended, but founders should move quickly if they want to apply as we expect the scheme to be oversubscribed. The British Business Bank has indicated it will take at least 21 days from the initial application for funding to be awarded to successful applicants.


  • Each private investor must meet specified criteria which are based on FCA rules (for example an ‘investment professional,’ ‘certified sophisticated investor’ or ‘certified high net worth individual’). Please also note the restrictions described above on founders and other connected parties forming part of the matched funding.
  • A director of the company will be required to certify that the company has previously raised £250,000 or more from third party investors in the period from 1 April 2015 to 19 April 2020 pursuant to a form which can be found here.
  • The company must have been incorporated on or before 31 December 2019, and, if the company is a member of a corporate group, it must be the ultimate parent company.


  • The convertible loan note instrument is a fixed, standard form document. However, certain headline terms can be negotiated in the investors’ interest. For example the interest rate must be at least 8% but could be higher if agreed with the investors, the discount rate must be at least 20% but could be higher if agreed with the investors and a valuation cap on the conversion price can be required by the investors. Note, however, that the maturity date of the loan is fixed at 36 months, contrary to the previously published term sheet which had indicated that the term of the loan could be reduced by the investors.
  • There is no reference in the loan agreement to the loan having to be used for general working capital purposes (as was previously referenced in the Future Fund term sheet), albeit there are specific restrictions on use of proceeds, for example, they cannot be used to repay shareholder debt, pay dividends or pay corporate financier fees.

Further information about the Future Fund including a useful Q&A for both investors and companies can be found on the British Business Bank website here.

If you would like to discuss the terms of the Future Fund further and/or instruct the Firm to act as the facilitating solicitor under the scheme, please contact Tony Littner or Tom Macleod from the Firm’s Start-up and Venture Capital Group.

Tony and Tom can also advise on the wider implications of the scheme to your business and ensure that the company has the required board and shareholder/investor approvals in place in advance of draw-down.