Following our prior blog post assessing market reaction to the Government’s recently announced £250 million "Future Fund" and while we wait for further details to be released, the following table sets out a high-level overview of what we know so far about the terms of the convertible loans to be issued under the scheme.

Clearly the devil will be in the detail and we will be keeping a close eye on any announcements with further blog posts to follow.





- Unlisted UK registered companies.

- Previously raised at least £250k in equity from third party investors in the last 5 years.

- Substantive economic presence in the UK.

- The scheme is aimed at ‘innovative companies’. What does it mean to be innovative?

- What specifically does a substantive UK presence mean? What if you have been part of a US based accelerator (e.g., Y Combinator)?

- Can companies pre-apply? If so, how?

Matched Funding

- Funding must be matched by private investors.

- Private investors must contribute at least half of the total amount of bridge financing raised.

- Are existing shareholders and friends and family counted in the match funding amount?

- Do advance subscription agreements count?

Loan Size

- Government bridge funding between £125k and £5m.

- No maximum amount of bridge funding from private investors.

Use of Proceeds

- Must be used solely for working capital purposes not to repay debt, pay dividends, pay bonuses or pay any advisory or placement fees to external advisors.

- Presumably this is limited to advisors engaged for the purposes of the funding? What about existing advisors?


- Conversion at a 20% discount to the price set by the relevant funding round.

- The rate will be higher if the company agrees a higher rate with matched private investors.

- Conversion into the most senior class of equity.

- Automatic conversion to shares on a "qualifying funding round" (the company raises an amount at least equal to the Future Fund and matched funding).

- On a "non-qualifying round" (where the company raises less money than received under the scheme) a majority of the matched investors will have the right to elect to convert at the 20% discount.

- On an IPO, the loan will convert at the 20% discount or be repaid (with a 100% redemption premium) – whichever results in the greater return.

- On conversion, only the principal of the loan will attract the discount rate, not any accrued interest.


- Loan is repayable after 36 months.

- If the Government and the matched investors elect to redeem the loan at the date of maturity (or on a sale or IPO), the amount to be repaid will be the full amount of funding, plus a 100% premium (i.e. double the amount of the original funding).


- 36 months.

Interest Rate

- Interest shall accrue on the loan at a rate of 8% per annum (not compounding) payable on maturity of the loan.

- The rate will be higher if the company agrees a higher rate with matched private investors.

Government Rights

- Limited corporate governance rights during the term of the loan and as a shareholder following conversion of the loan.

- Company to provide customary fundamental warranties and limited covenants.

- How extensive will the corporate governance rights be?

- What information rights will the government require?

Most favoured nation

- If more favourable terms are given to future investors, those terms shall apply to the funding provided under the scheme.

- Will the government automatically exercise these rights?

Negative pledge 

- The creation of any indebtedness which is senior to the loan from the Future Fund will not be permitted (unless such indebtedness is from a genuine third party that is not an existing shareholder or investor)

- What constitutes senior debt? Is invoice discounting / debt factoring captured?


- The Government may transfer the loan and, following conversion of the loan, any of its shares to an institutional investor which is acquiring a portfolio of the Government’s interest in at least 10 companies.

It is clear from the indicative terms of the scheme that the Government has attempted to strike a balance between the pressing need to sustain vital momentum for high-growth companies and the long term interests of the taxpayer in securing value for money.

Written by Alex Lloyd and Mark Devlin.