The British Business Bank revealed £55.9m worth of loans had been approved, despite receiving over £515m applications

Only one in 10 UK businesses have their Future Fund applications approved, amid criticism the scheme’s terms are misleading and difficult to understand.

The British Business Bank revealed £55.9m worth of convertible loans had been approved since the fund opened on 20 May, despite receiving applications worth £515m on the first day of opening.

The bank said the application process was expected to take 21 days for the funding to be made available. However, the loans were issued to only 53 companies so far – out of the 533 applications received in total.

One fast-growing food brand has told The Grocer that despite applying for the fund on the day of its opening, it still had not made any progress almost three weeks later, blaming a “bug” in the government’s system.

Other businesses are finding it hard to understand the scheme’s criteria failing to apply properly, leading to delays in the process, Seedrs campaign manager Scott Simpkin, who has helped companies with their applications, said.

“It seems a very low success rate overall,” he added.

“It is complicated to understand the terms and I haven’t met many founders that have, so that’s the reason I suspect there is a fault in the application submission process on the part of the business.”

The scheme was unveiled at the end of April as an alternative to the Coronavirus Business Interruption Loan Scheme (CBILS) for pre-revenue businesses, with the government providing between £125k and £5m, matched by private investment.

The loans will then convert into equity on the company’s next qualifying funding round, or at the end of their term if they are not repaid.

Many fmcg businesses, however, had chosen not to apply because of the convertible nature of the loan and its impact on EIS and SEIS, said Young Foodies co-founder Thea Alexander.

“There have also been concerns raised about what the government will do after attaining the shares,” she added. “Will they package the portfolio up and sell them on?

“The big unanswered questions and the sensitivity around giving away a share in their business amidst this uncertainty has led to the overwhelming majority of our members not seeing Future Fund as a viable option for them.

“We welcome the supportive nods from the Chancellor about looking into the scheme in more detail, but right now small businesses are simply not taking the leap.”