It may be hard to believe but the end of the three-year term for a number of Future Fund investments is now fast approaching. According to the last figures released by the British Business Bank, which administers the scheme, as of 31 December 2021, the Future Fund had approved a total of 1,195 loans, with a combined value of £1.15 billion. The loans were granted to companies across a range of sectors, including technology, life sciences, and renewable energy.

In anticipation of the upcoming maturity of these loans, the British Business Bank issued new guidance on 8 February setting out some helpful information around the maturity process.

If your business did take out a Future Fund investment during the COVID-19 pandemic and has not yet repaid this investment, converted it into equity, or otherwise managed an exit, it is worth refreshing your memory of the terms of the investment and carefully considering your next steps.

Extinguishing or dealing with the loan can be done in a variety of different ways:

1. Repay the loan in cash: The most straightforward, but financially painful, option is to repay the loan in cash. This can be done by repaying the full amount (being the amount of the loan with interest and the redemption premium (which is equal to 100% of the loan) at the end of the 36 month term.

2. Convert the loan to equity following a qualifying financing round: Future Fund loans are convertible loans, which means that they can be converted into equity in the business i.e. the loan can be converted into shares to be held by the Future Fund.

As at 31 March 2022, 337 convertible loans had converted into equity shares, in respect of which the Future Fund continues to hold an equity interest, meaning those companies have successfully raised further private sector capital through a qualified financing funding round.

The Future Fund loan will automatically convert to equity at the next “qualifying round” and this conversion will typically be at a 20% discount on the valuation at the time of the qualifying round.

If however your business does not have an imminent qualifying round (or agreed non-qualifying round) planned prior to the loan’s maturity date, the Future Fund will elect to redeem its loan plus the redemption premium (as mentioned in item 1 above) at maturity unless an extension is agreed (refer to item 4 below).

3. Exit: Depending on the terms of your convertible loan agreement, on an exit event (i.e. a share sale, an asset sale, an IPO etc), the loan will likely become repayable and will either need to be satisfied in cash or otherwise converted into equity similar to the conversion on a qualifying financing round.

4. Extending the loan: Latest guidance from the British Business Bank has indicated that it will be possible for businesses to request an extension to the maturity date of the Future Fund loans. Businesses will need to submit an extension request within 20 business days of receiving the initial email from the Future Fund confirming whether the relevant business is eligible to submit a “Maturity Extension Request” portal notification. The Future Fund shall have complete discretion as to whether it shall agree an extension to the maturity date, however guidance has indicated that “the Future Fund may consider, amongst other things, its commercial objectives, the adequacy of the results of our KYB/KYC, anti-money laundering and fraud and financial crime checks, wider public policy aims and proper safeguarding of taxpayer resources”. Most importantly however, the Future Fund will take into account the business’ ongoing compliance with the terms of the convertible loan agreement, in particular as to whether there are any actual or potential breaches.

Any extension request may be made by the business and a majority of any other lenders (in respect of their loans) agree the following minimum requirements:

i. loan period is extended by up to a maximum period of two years and the extension and any amended commercial terms apply for all parties to the convertible loan agreement;

ii. the company’s directors provide a solvency statement confirming the solvency of the company;

iii. the extension is documented using the Future Fund’s standard templates which cannot be negotiated;

iv. the discount rate (which is applicable in relation to any conversion) is increased by:

  • a minimum of 5% for an initial extension period of up to 12 months and
  • a minimum of 10% for an extension period beyond 12 months.

5. Insolvency: For those businesses who are already struggling financially, a demand for repayment of the Future Fund loan may be the last straw. We would strongly advise that you seek specialist advice from insolvency lawyers/practitioners if this is the case, as it might require considering as to whether a creditors’ voluntary liquidation is appropriate in the circumstances. If your business does find itself in a position unable to repay the Future Fund loan, you may also want to consider our article here which was published last month which looks at what company directors can do to avoid liquidation; particular issues with the Future Fund; and a possible way forward using another insolvency process.

Overall, the Future Fund has been seen as a valuable lifeline for innovative startups and scaleups during the pandemic, providing much-needed funding to help them weather the economic storm and continue to grow but with the time for repayment fast approaching the true value of the investment will need to be realised shortly.


  1. The three-year maturity dates are fast approaching, so make sure you start considering your options sooner rather than later.
  2. The Future Fund would appear to be taking a hard-line approach and will be insisting on a 100% redemption premium (on top of their original investment) for businesses who have not managed an exit or otherwise repaid the loan. For some businesses however, this may have dire consequences and may even push business into the brink of insolvency.
  3. There is the possibility of one extension but this is very much at the discretion of the Future Fund and is subject to a number of conditions and requires you to act fast in applying for such extension.
  4. If in any doubt about your options, consider taking specialist advice.

If you would like more information, please contact Paul Taylor.


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