What is the Future Fund?
The Future Fund is a matched funding scheme launched by the Government to support innovative companies facing difficulties during the Coronavirus outbreak. The Government will initially make available up to £250m with the potential for further support on the basis of review.
Am I eligible for the Future Fund?
The following eligibility criteria apply to companies:
- The company must have raised at least £250,000 in equity from third-party investors in previous funding rounds in the last five years (from 1 April 2015 to 19 April 2020, inclusive).
- If the company is a member of a corporate group, it must be the ultimate parent company.
- The company does not have any of its shares or other securities listed on a regulated market, a multilateral trading facility, a recognised investment exchange and/or any other similar market, stock exchange or listing venue.
- The company must be a UK incorporated limited company.
- The company must have been incorporated on or before 31 December 2019.
- At least one of the following must be true for the company:
- Half or more employees are UK based
- Half or more revenues are from UK sales
What are the key features of the Future Fund?
The Future Fund is a matched convertible loan of between £125,000 and £5m. The Future Fund loan will take the form of unsecured bridging funding which must constitute no more than 50% of the total bridging funding being provided. In other words half or more of the bridging round must be provided by third party investors.
Is there a cap on the total bridging round?
No. There is no cap on the total round, but the Future Fund loan must be the lower of 50% of the bridging round and £5m.
Will I be required to offer security for the loan?
No. The Future Fund loan is unsecured.
What can I use the Future Fund loan for?
The bridge round must solely be for working capital and must not be used to repay any borrowings, pay dividends or bonus payments to staff, management or shareholders or consultants.
Specifically, the Future Fund loan cannot be used to pay any advisory or placement fees or bonuses to advisors.
How does conversion work?
Either: The Future Fund and associated third party bridging will automatically convert to equity at the next “qualifying round”. This will require a minimum discount to that future round of 20%.
Or: The Future Fund and associated third party bridging will, if not repaid by the maturity date (maximum of 36 months), automatically convert into equity at a 20% discount to the last funding round. Unless, the Government requires repayment of the loan.
Will the loan always convert into equity?
No. On maturity of the loan (maximum of 36 months) the loan can be repaid with interest and redemption premium which is equal to 100% of the loan.
I am getting other kinds of aid to help respond to COVID-19 – can I still get a loan?
Yes. There is no indication that accessing any of the other Government support will preclude or limit applications to the Future Fund.
When is the Future Fund open?
The Future Fund will open for applications on 20 May and will stay open initially until the end of September 2020.
Are there further details available?
The Government has issued a partial term sheet that sets out the minimum terms that a Future Fund investment will require. A copy can be downloaded here.
More technical detail has now been published by the British Business Bank – click here for more details.
Why is Shaw & Co charging a fee to support Future Fund applications if I apply myself?
Accessing the Future Fund will require the raising and negotiation of matched funding from private investors as well as complying with the technical process of accessing the Government funds. The Government has set out a template set of terms however, the terms on which private investors may make available their investment may vary.
Our Future Fund support service has the following benefits:
- Right first time. We have significant experience working with both private investors and the Government support programmes provided by the British Business Bank. We are perfectly placed to bring together your round quickly and efficiently.
- Maximise support. We can make sure your plan and request for funding demonstrably maximises the support offered by the government before entering into expensive bridge financing. We have a working knowledge of the Coronavirus Job Retention Scheme, VAT deferrals, Time to Pay arrangements, rates relief and other initiatives.
- Robust forecasts. Whilst your forecasts will always be your own, we can advise you on the revenue deferrals and cost mitigations that investors consider reasonable and acceptable when presenting your projected cashflows as part of a robust financial model to support the round.
- Founder protection. We can help ensure that dilution on Founders and management is minimised. Both through incentive and option schemes and by enhancing valuations on future rounds.
- Resource allocation. You may have more pressing things you need to deal with in your business that you cannot outsource. We can be the extension of your team that manages much of the Future Funds bridging loan process for you.
What fees will Shaw & Co charge?
We recognise that these are very stressful times for businesses, and we want to help, but we must be a viable business ourselves to do so.
We are offering to help with your Future Fund proposal in return for discounted fees as follows.
No fees may be funded by the Future Fund loan itself as such we structure our fees so that the Future Funds sits outside the scope. Our fees are payable only on the matched funding from private investors and must be clearly funded from this investment or existing company cash.
Our Success Fees are calculated as:
- A Base Fee of £7,500 regardless of bridging fund amount, plus;
- 3% of the excess over £125,000, plus:
- 2% of the excess over £1,000,000.
Other than a Commitment Fee set out below, our fees are fully contingent on successful loan approval.
We will ask for a Commitment Fee of 10% of the projected Success Fee. This fee must be paid in advance of commencing work on your round. Success Fees are reduced by Commitment Fees already paid.
Our fees will attract a further 10% premium for amounts raised from investors not already represented in the share register at the time of engagement. New money will always be considered the last money in. These fees represent significant discounts on our normal fundraising fees especially when taking into account the exclusion on the Future Funds themselves.
Why does Shaw & Co charge a Commitment Fee?
Our standard practice within our business is to charge a commitment fee. This is an exchange of value that ensures that you are committed to working with us and us with you. We will invest a significant amount of time helping you with your bridging round and application process and we need to ensure those that we are working with meet our level of commitment to securing funds.
Is the Commitment Fee refundable?
Yes. In the event we will decline to proceed following full assessment of your business case we will refund your Commitment Fee. The Commitment Fee is otherwise non-refundable in all other circumstances excepting non-performance of our service commitment to you.
Given the high number of requests for support anticipated, we shall only move to full assessment of your business and proposal after engagement terms are agreed and the Commitment Fee is received. We may decline to proceed if following our post engagement assessment, we believe that you will not be eligible for the Future Fund for a technical reason or that an investment proposal, despite our input, is unlikely to meet the standards required by investors. Our post engagement assessment will be completed with three business days of receiving the information requested of you. Any Commitment Fee refunds will be processed within two working days.
How quick is the process from application to receiving funds?
This process is as yet untested at volume. We anticipate a four to six week process to bring together the round. This time frame will be determined by the resource available to process applications at investors and the quality of the proposals. Our service is designed to minimise the time to receiving funds as much as is possible by supplying all parties what they need in the format they need straight away.
When do I pay the Success Fee?
The Success Fee is due within five days of the facility agreements being entered into by you.
If I decide to not draw down on the funds, do I need to pay the Shaw & Co Success Fee?
Yes. You need to pay our Success Fee if the loan agreements are entered into by you even if the funds are not drawn. You may also choose to delay entering into loan agreements for many reasons. However, we will have dedicated significant resource in getting to approval of your facility. We will speak to you about receiving our fee in the event of a delay for genuine reasons, rather than an objection to terms, so that we can fund the resource to go on and help others.
Are there any other fees payable?
You may require support from your lawyer or your accountant in meeting the requirements of the Future Funding process. This may incur additional fees which you will need to pay. Any amount paid to Shaw & Co shall not be reduced by any other fee payable by you.
Does Shaw & Co receive any commission from investors or payment from the Government?
No. Shaw & Co does not receive payment from any party other than its clients. We are proud of and fiercely protect our independence so that we may advise you free of any conflict of interest.
Would you like Shaw & Co to help you secure a Future Fund loan?
If you would like Shaw & Co to help you with a Future Fund bridging loan, please click here.