Repayable contribution

A repayable contribution is money you may have to give back. It is not a loan (there is usually no interest and no security) but repayment is triggered by defined events, most commonly commercial success arising from the funded project.

Two forms exist. An UNCONDITIONALLY repayable contribution is repaid on a fixed schedule regardless of outcome, which makes it a soft loan in all but name. A CONDITIONALLY repayable contribution is repaid only if agreed conditions occur (revenue passing a threshold, the product reaching market, gross margin exceeding a level) and is forgiven if the project fails commercially.

The conditional form is genuinely attractive risk-sharing: the government carries the downside of a technical failure and shares the upside of a success. It is also more complicated than it looks, because the repayment trigger is defined in the agreement and the definition of the relevant revenue can encompass more of your business than you expected.

Repayment terms outlive the project by years. A contribution repaid as a share of revenue from a product line can still be running a decade after the work finished, which is a disclosure item in any subsequent financing round and a question every acquirer will ask.

Read the trigger, the ceiling and the duration before signing. What proportion of what revenue, capped at what multiple of the original contribution, for how many years, and what happens on a change of control. Those four answers determine whether this is cheap capital or an obligation attached to your company's future.