In this difficult time of Coronavirus outbreak, there are many schemes introduced by UK government to provide financial support to small and medium sized businesses. One of them is Coronavirus future fund scheme. Coronavirus future fund scheme is the scheme introduced by UK government to provide adequate funds to the businesses facing financial difficulties in operating their businesses in coronavirus pandemic.
- What is Coronavirus future fund scheme?
- Who can apply for Coronavirus future fund scheme?
- How much minimum and maximum amount of Loan sanctioned by the government?
- How much is the Term and rate of interest in Coronavirus future fund scheme?
- What is the concept of bridge funding under Coronavirus future fund scheme?
- Decision making rights of the government
- Warranties provided by the Company
Coronavirus Future Fund Scheme
Coronavirus future fund scheme is the scheme announced by UK government to issue convertible loans between £125000 to £5 million to innovative companies who are not having adequate funds and facing financial difficulties in continuing business operations due to coronavirus outbreak.
These convertible loans issued by the UK government may considered as a suitable option for those businesses that rely on equity investment and unable to take the advantage from the coronavirus business interruption loan scheme. The government have assigned initially a total amount of £250,000,000 for this scheme. It is expected to start in May 2020 and may open until September 2020.
The scheme is issued in partnership with the British business bank.
Eligibility of the Coronavirus Future Fund
In order to get eligible for this scheme, you need to meet certain conditions. You are eligible only -
- If your business is UK based
- If your company is a UK unlisted registered company
- If you have raised at least £250,000 in aggregate in the last 5 years from funding rounds from third party investors in UK
- If your company is a member of a corporate group
- If you are capable of attracting equivalent amount of funding from matched investors (Rest of the 50% from bridge funding issued by the government)
- If you have done the following checks before applying or accessing the loan –
- Customer Fraud
- Money Laundering
Minimum & Maximum amount of Loan Sanctioning
The minimum loan amount sanctioned by the government to any UK company under coronavirus future funding scheme shall be £125,000 whereas the maximum loan amount sanctioned shall be £5,000,000.
Term & Rate Of Interest for The Coronavirus Future Fund
The loan will be offered to the eligible UK companies for maximum period of 36 months. The government shall receive minimum of 8% interest annually to be paid by the loan holder on the date of loan maturity. Higher the agreed rate between the company and the matched investors, higher will be the rate of interest.
Bridge Funding Issued Under Coronavirus Future Fund Scheme
Meaning & Use Of Bridge Funding
The bridge funding is the funding of 50% of the loan sanctioned amount by the UK government to the eligible UK businesses under coronavirus future fund scheme. The bridge funding issued by the government must be used exclusively for working capital purposes.
Non-Usage of Bridge Funding
Bridge funding issued under coronavirus future fund scheme shall not be used by the businesses for the following purposes –
- To repay any borrowings
- To pay bonuses or dividends to staff members, management, consultants or shareholders.
- To pay placement fees
- To pay bonuses to external advisors
- Payment in respect of government loan
- Payment to any advisory
Government holds limited corporate governing rights during the tenure of the loan and even after loan conversion as a shareholder.
Limited warranties shall be provided by the company in respect of the following –
- Title & ownership
- Loan eligibility as per government eligibility criteria & law compliances
- Borrowing facilities of the company
- Loan closing of lenders in litigation and insolvency matters.
Also Read :
- Budget 2020 Summary
- How to get Coronavirus grant from the government for small businesses?
- Coronavirus Business Interruption Loan Scheme (CBILS)
- SEIS and EIS Investment Scheme for UK Startups
- Government Support for Small Businesses to Fight Coronavirus Crisis