Defence Innovation Loans

The Defence and Security Accelerator (DASA) and Innovate UK Loans Ltd (Innovate UK) are working together to offer a defence funding competition: the Defence Innovation Loan. Innovation loans of up to £1 million are available to small and medium-sized enterprises (SMEs) at a below-market interest rate of 7.4% per annum, designed to support later-stage research and development (R&D) projects with a clear path to commercial success. These loans aim to help businesses convert mature defence innovations into strong propositions for defence procurement, where public sector support is needed and the business can demonstrate its readiness to take on loan funding.

To take on a Defence Innovation Loan for a project you must:

• Be a UK-registered SME
• Intend to exploit the results in the UK or overseas to make a significant and positive impact on the UK economy and/or productivity
• Give evidence that your business is suitable to take on a loan
• Have a technology readiness level of 6 and above

The applicant must include evidence of:

• A high quality, later-stage R&D project with viable opportunity for growth
• A suitable team, with strong management and delivery approach to the project
• A strong defence requirement for the capability
• A clear route to commercial success and focus on growth or scale up
• A plan to cover interest payments on a quarterly basis
• A plan to repay the loan within seven years of contract award
• Why public funding is required to be able to carry out the project
• Why you are unable to fund the project from your own resources or other forms of private-sector funding
• Development of a new and innovative product, process, or service which can provide a competitive advantage over anything similar in the field
• A clear, evidence-based plan to deliver significant economic impact, return on investment (ROI), and growth through commercialisation, as soon as possible after project completion
• A drawdown schedule that adheres to the terms of the loan (i.e. up to three years availability period) and that matches the information provided to Innovate UK

As part of your application, you will be asked to confirm that you have spoken to a member of the DASA Business Growth and Finance team regarding your innovation, and that they confirmed its suitability for the Defence Innovation Loans competition.

The maximum term of an innovation loan is seven years. This can be made up of any structure of the following:

• Stage 1: Availability period of up to three years during which drawdowns will be permitted.
• Stage 2: Extension period of up to two years during which no further drawdowns will be permitted.
• Stage 3: Repayment period of up to five years.