Modalities of the Loan
Once the foundation decides that a loan will be granted, the applicant will receive a contract draft, which should be negotiated and signed by both parties within than three months of issuance. Without a signed contract, no loan can be paid out.
The obligations of the loan recipient
The companies that receive funding have the following obligations towards the foundation, as will be specified in the contract:
- Signing of a loan or an investment contract in correlation with the foundation, and fulfillment of the contract
- Use of the loan only for the purposes listed in the loan contract
- Trustworthy management of the company. Should the company’s purpose be changed, the foundation must be informed
- Proactive reporting. The form of reporting is defined in the contract
- Repayment of the loan. The duty to inform the foundation should the timely repayment of the loan not be possible
- Mentioning of the foundation’s support in external communications (business presentations, publications, website)
- Obligation to compensate the foundation for its investment and the risk it has taken early on. Should the company at a later stage reach a significant commercial success, achieve a successful exit or obtain a significantly higher valuation, it has a reimbursement obligation towards the foundation as specified in the loan contract
The use of the loan
The idea of the loan is to help the start-up cover costs that originate while attempting to demonstrate the proof of concept. The loan should function as a backbone for this work such that a first round of financial support can later be obtained from early stage investors and support organizations.
Such costs are for example: the costs of founding a company, payments for securing IP and patents, acquisitions of capital equipment, initial purchases, production of prototypes, attending conferences or exhibitions, or acquisition of market information (list not complete). It is permissible to use the loan for financing the required company contributions towards its CTI projects.
The loan should not be used for paying salaries. Our loan should not take on the character of a credit facility. The usage of the loan is clearly specified in the contract.
The conditions of the loan
The foundation operates as a non-profit organization. It expects the loan to be repaid by the deadline specified in the contract. In this manner the foundation retrieves the means to support the next start-ups. Funding start-ups that are still very young in their development bears ample risks. Unfortunately, the write off of a loan can and will result from time to time and needs to be recognized by the foundation. To counteract these write offs, a company funded by the foundation is obliged to contribute to the reimbursement of the risks taken by the foundation, only in the event it should become a significant success.
The loan recipient is obliged to sign a loan contract with the foundation, in which the conditions are specified. The standard terms and conditions of a loan are the following:
- Loans will only be granted to legal entities (GmbH or AG).
- The required amount of funding is stated in the contract. A maximum of 150’000 Swiss francs is possible. At the moment, to allow the support of more start-ups, the foundation has set the limit to 100’000 Swiss francs.
- The loan will be granted for a total of 24 months, interest free, from the date when the first tranche of the loan has been drawn down.
- If the loan is not repaid within these 24 months, the outstanding amount will be subject to an 8% p.a. interest rate. This interest rate is non-negotiable.
- The first tranche must be drawn down within 12 months after the loan contract has been signed. Failure to do so will cause the loan grant to expire.
- The expected reimbursement to the foundation in case of a significant success is a flat fee of 30’000 Swiss francs.
Definition of a success case
A successful business case is defined as follows:
The full repayment of the loan and a successful exit within the first 10 years takes place. A successful exit may be an initial public offering (IPO), a trade sale or secondary offering. If none of the above takes place within 10 years, the company is no longer obliged to reimburse the foundation. An implied moral reimbursement responsibility, however, is still upheld.
Obtaining the loan
The loan can be acquired as early as seven days after the contract has been signed by both parties. The exact process of drawing down the loan is described on an information sheet that will be handed out to the applicant after the mutual signing the contract.