UK registered businesses can apply for loans for innovative projects with strong commercial potential to significantly improve the UK economy.
Opens: 14 September 2023
Closes: 8 November 2023
Innovate UK is offering up to £25 million in loans to micro, small and medium sized enterprises (SMEs). Innovate UK innovation loans are for highly innovative late stage research and development (R&D) projects with the best potential for the future. There must be a clear route to commercialisation and economic impact.
Your project must lead to innovative new products, processes or services that are significantly ahead of others currently available, or propose an innovative use of existing products, processes or services. It can also involve a new or innovative business model.
Your project must focus on one or more of the future economy areas included in the Innovate UK plan for action.
You must be able to show that you:
need public funding
can cover interest payments
will be able to repay the loan on time
The funding available will be allocated across a series of competitions with the next round opening on the day the previous round closes:
round 11 opens 14 September 2023 (this competition)
round 12 opens 9 November 2023 and will close on 10th January 2024
In applying to this competition, you are entering into a competitive process. This competition closes at 11am UK time on the deadline stated.
Loans can be between £100,000 and £2 million.
Who can apply
You can apply for a loan of between £100,000 and £2 million to fund your project’s eligible costs.
Projects can last up to 5 years, including both the R&D and commercialisation phases. Projects are expected to start by 1 April 2024. Your exact project start date and first innovation loan drawdown will depend on the timing of the final credit committee decision and completion of loan documentation.
To receive an innovation loan for a new project you must:
be a UK registered micro, small or medium-sized enterprise (SME)
carry out your project from or in the UK
intend to exploit the results from or in the UK
give evidence that your business is suitable to take on a loan
We will evaluate whether your business is suitable to receive an offer of a loan for your project.
Individuals, large companies, not for profits, charities, academic institutions, and research organisations are not eligible for innovation loans.
More information on the different types of organisation can be found in our Funding rules.
Only single businesses can receive loans, so collaboration with other organisations cannot be funded in this competition.
You must only include eligible project costs in your application.
You are responsible for entering your own project costs in the application.
Under current restrictions, this competition will not fund any procurement, commercial, business development or supply chain activity with any Russian or Belarusian entity as lead, partner or subcontractor. This includes any goods or services originating from a Russian or Belarusian source.
Subcontractors are allowed in this competition.
Subcontractors can be from anywhere in the UK and you must select them through your usual procurement process.
You can use subcontractors from overseas but must make the case in your application as to why you could not use suppliers from the UK.
You must provide a detailed rationale, evidence of the potential UK contractors you approached and the reasons why they were unable to work with you. We will not accept a cheaper cost as a sufficient reason to use an overseas subcontractor.
All subcontractor costs must be justified and appropriate to the total project costs.
Number of applications
Your business can only submit one application per round of this competition. If you submit more than one application, only the first application will be considered for assessment.
You can use a previously submitted application to apply for this competition.
We will not award you funding if you have:
failed to exploit a previously funded project
an overdue independent accountant’s report
failed to comply with grant terms and conditions
Subsidy control (and State aid where applicable)
This competition provides funding in line with the Subsidy Control Act 2022. Further information about the Subsidy requirements can be found within the Subsidy Control Act 2022 (legislation.gov.uk).
Innovate UK is unable to award organisations that are considered to be in financial difficulty. We will conduct financial viability and eligibility tests to confirm this is not the case following the application stage.
EU State aid rules now only apply in limited circumstances. Please see our general guidance to check if these rules apply to your organisation.
If you are unsure about your obligations under the Subsidy Control Act 2022 or the State aid rules, you should take independent legal advice. We are unable to advise on individual eligibility or legal obligations.
You must always make sure that the funding awarded to you is compliant with all current Subsidy Control legislation applicable in the United Kingdom.
This aims to regulate any advantage granted by a public sector body which threatens to, or actually distorts competition in the United Kingdom or any other country or countries.
Up to £25 million has been allocated to fund innovation projects across the current rounds of this competition.
Innovate UK will offer loans of between £100,000 and £2 million, based on your project proposal and our judgement of the suitability and affordability of a loan for your business. The Innovate UK Loans Ltd credit committee will decide the final terms, amount and length of the loan offer.
Innovation loans will be:
Available for up to 3 years when the project is under way, but the exploitation has not yet started (the ‘availability period’). You can borrow in stages (‘drawdowns’) during this period and will pay interest at 3.7% per annum on anything you borrow, with additional interest at 3.7% accrued and deferred until the repayment period.
Extended until the first commercial sales from the results of the project, up to a maximum of 2 further years (the ‘extension period’) after the end of the availability period. You will not be able to make further drawdowns during this period. You will not have to make repayments, but you will pay interest on the amount you have borrowed at 3.7% per annum, with additional interest at 3.7% accrued and deferred until the repayment period.
Repayable over a maximum of 5 years (the ‘repayment period’) after the availability and extension periods. You will have to repay anything you have borrowed, including interest accrued and deferred from the availability and extension periods, on a quarterly schedule. You will pay interest at 7.4% per annum on the outstanding loan amount.
These are the longest periods we will consider. The overall term of the loan must not exceed 7 years. Your application must propose how long your project will last, including the availability and extension periods, and how long the repayment period you are requesting, will be.
These periods must be based on the needs of your business. We will consider the suitability of your proposed timings in any loan offer that we make to you.
We expect to take security in the form of a debenture. We will not require personal guarantees.
More details of our approach, including a summary ‘heads of terms’ document setting out the main terms and conditions of the loan, is in the terms and conditions for this competition.
You can get a loan of up to 100% of your eligible project costs. Since the loan will have favourable terms, particularly a below-market rate of interest, the value of this benefit over the life of the loan will be the equivalent of a grant.
The gross grant equivalent will be the present value of the difference between the market cost of interest and fees of a similar loan, using reference rates for interest, and the cost of an innovation loan. The present value is determined at the date of commitment of the loan.
For experimental development projects this grant equivalent, as a proportion of the eligible project costs, can be:
up to 45% if you are a micro or small business
up to 35% if you are a medium-sized business
We expect that most innovation loans will meet this requirement.
For more information on company sizes, please refer to the company accounts guidance.
If you are applying for an award funded under State aid Regulations, the definitions are set out in the European Commission Recommendation of 6 May 2003.