Which businesses benefit from the ‘Future Fund’


The Chancellor has announced a welcome boost to the startup and scale-up economy with a £1.25Bn package to support innovative and high growth businesses, of which many would not have been eligible through the previous CBILS support scheme.

While early stage businesses have been eligible for government support through the HMRC ‘Time to Pay’ scheme, new rules on statutory sick pay, business rates relief, small grants and the ‘Coronavirus Job Retention scheme’ a.k.a. furloughing, many early stage businesses have felt this support did not provide the cash inflow they required. The eligibility criteria of CBILS was limiting to most earlier stage businesses as it required a positive EBITDA (earnings before interest, tax, depreciation and amortization) to demonstrate the ability to repay the debt, and for businesses to comply with State Aid rules. These rules determine businesses to be an ‘undertaking in difficulty’ if the company has lost more than 50% of its share capital through losses, or it has an EBITDA interest coverage ratio <1.0. These limitations have prevented many early stage businesses from accessing CBILS support through ineligibility.

The newly announced support is therefore welcomed, as it will help to bridge funding gaps for a significant group of businesses outside the previous schemes.

What does this support look like?

The headline numbers are £1.25Bn of capital, broken down into:

  1. ‘Future Fund’ – a £500m pot of capital made up of £250m from the government which must at least be matched by private investors.

    1. This unsecured bridge funding takes the form of convertible loan notes – initial loans which are converted into equity on certain events
    2. The government loans will be distributed through the British Business Bank, for between £125k and £5m, and mature in 3 years unless there has been an equity round before then
    3. The loans carry a minimum 8%/annum interest charge
  2. Innovate UK Grants & Loans scheme – a £750m package to support existing and new Innovate UK funding.

    1. Includes £200m of accelerated payments to existing Innovate UK competition winners
    2. Includes an extra £550m of grants and loans to be made available to new and existing customers
    3. This £550m will include support of up to £175k to around 1,200 businesses not currently supported by Innovate UK (c.£210m total)

What do I need to know about the ‘Future Fund’?

As with any support package, businesses who need the support should understand the eligibility criteria, limitations and how the process works.

  • Funding is in the form of convertible loan notes; If the loan is not repaid the government will take an ownership stake in the business
  • The loan note converts to equity at the next equity funding round, or it matures after 3 years (whichever is sooner), at which time the loan needs repaying or it converts.
  • There is a minimum interest of 8% per year on the loan.
  • Businesses must be a UK registered entity and must have raised £250k of investment in the past five years to be eligible.
  • The loan must be used for working capital purposes only. The recipient is restricted from repaying existing borrowings, paying dividends or bonuses, or paying external advisory or placement fees with the loan.
  • Some warranties will be required.
  • There is a negative pledge, meaning no other investor or director debt can be superior over this loan while it is in place.

Ultimately, this support is a lifeline for businesses who have already raised capital investment and have investors interested in investing further into the business. The government support is reliant on encouraging private investors to invest, when multiple sources of data show there has been a decrease in equity investment in 2020. You can read my assessment of the impact of Covid-19 on the equity funding market in my previous blog here.

  • The Innovate UK support will see more grant and loan capital available, and it will also become easier to obtain with streamlined application and monitoring processes.
  • It is anticipated there will be an increase in deployment of the capital through the existing ‘Smart Grants’ and ‘Innovation Loans’ schemes run by Innovate UK.
  • Applications for this with be directly though Innovate UK’s website.
  • Innovate UK predominantly support innovative businesses which have built novel or pioneering developments, often in technology. To protect the investment, the development should in most cases be defensible through some form of IP protection.

This type of support is very useful for businesses ineligible for CBILS who have a stronger research and development focus and who may or may not have already received investment of any quantity. The £200m set aside for existing customers allows Innovate UK to protect the investments they have already made to ensure there is a decreased risk of investment wastage.

If you are a business looking to raise capital through grant funding, you may be interested to join our funding readiness programme to understand principles and tips to assist your application. It is free to join and you can register here.


The government’s announcement is both timely and welcome. It stands to support truly innovative businesses with much needed capital injections to ensure that beyond the Covid-19 pandemic, the UK continues to stand at the forefront of innovation and evolution.

To temper this with reality, the support announced today is not suitable for most small businesses. The backbone of the economy from small florists, to work-from-home accounts technicians, as well as early-MVP developing businesses who were ineligible for CBILS will also be ineligible for the two packages of support offered today. The clear focus of today’s announced package is to support businesses who are at the forefront of innovation, which the CBILS package did not cover.

About Benjamin

Benjamin is a Funding Solutions and Business Insights Lead for Eagle Labs in Barclays Ventures. Supporting Eagle Labs and their companies for four years, Benjamin set up and ran the first Eagle Lab incubator in Cambridge in 2015, as well as being Head of Region for the South and East Eagle Labs. Previously Benjamin worked in Barclays corporate bank in coverage-relationship roles. Throughout his career, he has supported businesses from start-ups all the way through to multinational corporates and is well placed to support a variety of businesses.

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