Coronavirus Funding: Future Fund and additional Innovate UK funding

A funding package worth up to £1.25 billion is being made available to protect UK businesses that are at forefront of driving innovation and development in the UK economy through the Government’s Future Fund and additional grant and loan funding from Innovate UK, the national innovation agency.

Future Fund

The Future Fund is designed to provide funding to sustain innovative and/or high-growth potential small and medium-sized companies which are experiencing financial difficulties as a result of the COVID-19 lockdown but might not be eligible for other forms of Government backed Coronavirus funding.

A total of £250 million has been earmarked for the Future Fund, which is to be launched later in May and is currently set to be open until the end of September 2020. Funding under the scheme will be provided via the British Business Bank.

Whilst the precise details of the Future Fund are still to be confirmed, the following headline details have been announced:

  1. Future Fund loan amounts will be between £125,000 and £5,000,000.
  2. The borrower must have already raised £250,000 in the last five years from private third-party investors.
  3. A Future Fund loan must be 100% matched by other private third-party investors, although there will be no cap on the amount that can be raised from third-party sources.
  4. Future Fund loan is to be used solely for working capital purposes.
  5. The minimum interest rate is 8% per annum paid on maturity of the loan. If third-party investors receive a higher return, the interest payable on the Future Fund loan will match this higher rate.
  6. The loan will mature after a maximum of 36 months.
  7. On maturity (and on the occurrence of certain other events e.g. further qualifying funding rounds, a sale or listing), the loan will be automatically converted to equity in the company unless the overnment opts for repayment of the loan with a redemption premium (being amount equal to 100% of the principal).
  8. Limited warranties and covenants will be provided by the company to the Government in connection with the loan.

Given the need for matched funding and the automatic conversion of the loan to equity, the Future Fund is likely to be an extremely complex scheme which will require specialist legal and financial guidance and certainly will not be suitable for all companies.

Innovate UK Funding

In addition to the Future Fund, the Government are making available (via Innovate UK) £750 million to support SMEs who focus on research and development. The funding will be made available through Innovate UK’s existing grants and loan schemes.

On an opt-in basis Innovate UK are to accelerate up to £200 million of grants and loan payments for 2,500 existing Innovate UK customers with an additional £550 million being set aside to boost support existing Innovate UK customers. 1,200 companies who are not currently Innovate UK customers are also to be offered up to £175,000 of support The first payments are due to be made by Innovate UK before the end of May.

If you would like to discuss how we can assist, please contact Michael Hall at or on 07583 016983.

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