Funding competition Innovation loans: manufacturing and materials readiness

Loans to enable the increase in manufacturing readiness of innovations in manufacturing systems or processes and/or materials development, integration or reuse.

This competition is now closed.

Register and apply online

Competition sections


Innovate UK is to offer up to £10 million in loans to micro, small and medium enterprises (SMEs) for innovative manufacturing or materials projects.

The aim of this competition is to provide a loan which will help SMEs increase manufacturing readiness. This applies to innovations in manufacturing systems, technologies or processes, and/or materials development, properties, integration or reuse.

Proposals should focus on the scale-up of recent or ongoing manufacturing process innovation and/or materials development activities. The project’s aim should be to enable UK based companies to progress innovative manufacturing or materials developments to commercial readiness.

Projects should last up to 5 years, of which up to 3 years can focus on research and development (R&D), and up to 2 more years to establish a clear route to commercial success. Loan repayments will be required over a further period of up to 5 years.

Businesses must be able to show that they:

  • can cover interest payments
  • will be able to repay the loan on time
  • need public funding

Funding type


Project size

Loans of between £100,000 and £1 million are available. Projects should last up to 5 years.

Who can apply

To take on an innovation loan for a project you must:

  • be a UK based SME
  • carry out your project in the UK

Individuals, research organisations and large companies are not eligible for innovation loans. Only single businesses can receive loans, so collaboration with other organisations cannot be funded in this competition.

Innovation loans will not be offered to:

  • businesses we consider unable to afford the interest and repayments on the loan
  • businesses that have not demonstrated that they are unable to obtain finance from other sources on suitable terms

Funding and project details

We have allocated up to £10 million to provide loans to suitable SMEs to fund innovation projects in this competition.

We will offer loans of between £100,000 and £1 million. This is based on your project proposal and our judgement of the suitability and affordability of a loan for your business.

Innovation loans will be:

  1. Available for up to 3 years (the ‘availability period’) when the project is under way, but the exploitation has not yet started. You can borrow in stages (‘drawdowns’) during this period and will pay interest on anything you borrow.
  2. Extended for up to 2 years (the ‘extension period’) when the project is focused on developing the commercialisation of the product. 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.
  3. Repayable over a maximum of 5 years (the ‘repayment period’) after the availability and extension periods. You will have to repay on a regular quarterly schedule and you will pay interest on the outstanding amount of the loan.

These are the longest periods we will consider. Your application should propose how long your project will last (including the availability and extension periods) and how long the repayment period should be. These should 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.

Interest will be charged at the rate of 3.7% per year on outstanding amounts, payable quarterly in arrears.

We expect to take security where it is available, for example over assets purchased and intellectual property developed with the proceeds of the loan. 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 loans, are included in the guidance for applicants.

Competition scope

We want to help SMEs to progress their development of innovative manufacturing and materials technologies with the aim of achieving manufacturing and commercial readiness. This should include:

  • capability to produce prototype products or systems in an environment relevant to production at a commercially viable rate or scale
  • evidence that a financeable business with significant market potential can be developed during the commercialisation phase
  • ability to market and sell the resulting products, processes or services, following the commercialisation phase

Projects should focus on a manufacturing or materials innovation rather than a product innovation. Your project must show significant late stage innovation (in other words, be at an experimental development stage). It must also clearly show how you are working with end users, problem owners or those who will ultimately buy the results of your innovation in one of our priority areas:

  • innovation in a manufacturing system, technology, process or business model
  • innovation in materials development, properties, integration or reuse

Projects should focus on the scale-up of recent or ongoing manufacturing process and/or materials development activities. Those activities should have already overcome the main technical risks and be at a maturity of Technology Readiness Level (TRL) 5 or higher, and/or at a Manufacturing Readiness Level (MRL) of 4 or higher, when the loan period commences. See the guidance for applicants for definitions of readiness levels.

Specific themes

This competition is open for manufacturing process and materials development innovation from all manufacturing sectors. Loans will be available to fund all or part of the eligible project costs to develop manufacturing readiness in these innovative processes. Examples of applicable projects are given below. These examples are not exhaustive, but are given as illustrations of the various types of projects which might be considered.

1. Creation of new or improved manufacturing facilities

Development and production of innovative equipment and systems that will enable higher volume, lower cost and/or higher quality production.

2. Development of software

Research and development of new software (for example autonomous systems or artificial intelligence) to develop or enhance manufacturing capabilities through the application of digital information. This would be followed by testing of demonstrators by potential users and validation by regulatory authorities if applicable.

3. Development of new business models

Research and development of new business models, such as ‘servitisation’; this is where businesses develop the capabilities to provide services and solutions that supplement their traditional product offerings. It would be followed by testing of demonstrators by potential users.

4. Materials testing

Production of test samples and testing at certified test facilities. This is to certify that the material performance meets regulatory and customer requirements. This would be the last hurdle before the new material can be accepted by customers.

Project types

Your project should focus on later stage research and development (R&D) activities classified as experimental development. We expect you to be able to show a clear route to commercial success for your project.

You could 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 and will be a form of State Aid. 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. The guidance for applicants contains more information to explain the grant equivalent calculation for an innovation loan.

Find out if your project activities fit the definition of experimental development.

Find out if your business fits the EU definition of an SME.

Projects we will not fund

In this competition, we are not providing grant funding.

Innovation loans will not be offered to:

  • businesses we consider unable to afford the interest and repayments on the loan
  • businesses that have not demonstrated that they are unable to obtain finance from other sources on suitable terms

We will not lend for:

  • innovations that are deemed too early for an innovation loan and require significant early stage R&D
  • incremental innovations unlikely to significantly improve UK economic and SME growth

In this competition, we will not fund projects:

  • covering product or prototype development where the main innovation, challenge or risk is not in the manufacturing process or materials
  • that apply existing and well-known manufacturing processes to develop a new product, without significant innovation challenges in the processes themselves
  • that involve choosing a suitable material for a product from a library of known materials, where there is no further significant technical development of the material or innovation in the manufacturing process
26 February 2018
Competition opens
5 March 2018
MTC, Ansty briefing event.
6 March 2018
London and online briefing event.
8 March 2018
AMRC, Rotherham briefing event.
9 March 2018
NBMC, Darlington briefing event.
14 March 2018
Technology and Innovation Centre, Strathclyde briefing event.
15 March 2018
Sci-Tech, Daresbury briefing event.
16 March 2018
Engine Shed, Bristol briefing event.
22 March 2018
NIACE Centre, Belfast briefing event.
25 April 2018 12:00pm
Registration closes
2 May 2018 12:00pm
Competition closes
15 June 2018
Applicants notified
1 October 2018
Estimated project start date and start of drawdowns.

Before you start

To apply:

  • register online by clicking the green button
  • read the innovation loans guidance
  • read the guidance for applicants for this competition
  • read the declaration in the guidance for applicants that you will be required to confirm in your application and sign as part of your loan agreement
  • read the summary heads of terms in the guidance for applicants
  • consider attending one of the briefing events listed in ‘Dates’
  • complete and upload your online application on our secure server
We will not accept late submissions. Your application is confidential.
Entering into a loan agreement with us is a financial commitment. You will need to confirm to us that the loan is for business purposes. You are wholly responsible for ensuring that it is the right approach to financing your business, that your business is legally allowed to borrow and that you will be able to fulfil the repayment obligations under the loan. You should consider taking expert advice before submitting an application.

By submitting an application, you are providing authority for Innovate UK (and any subsidiary or agency appointed to assess your application) to undertake checks on the financial standing of your business. This might include, but will not be limited to, checks with credit reference agencies (which might be recorded on your record) to determine your credit standing, identity, beneficial ownership and control, and source of existing funds.

At the end of the application process (and again before entering into a loan agreement) you, or the person appointed by your company to act for it, will be required to enter into a legally binding declaration. Again, you should consider taking independent advice on the content of this declaration.

An application for an innovation loans competition requires different information from one for a grant application. Even if you have applied for funding from us before, you are strongly advised to read the innovation loans guidance, the specific guidance and the application questions for this competition when completing your application.

Guidance on applying

There are 2 parts to applications:

  1. Quality of the project, which will be assessed by independent experts based on part A of the application and the part A project finance form
  2. Suitability of the business to receive a loan, which will be evaluated by our credit team based on part B of the application and the business financials form

Success is required in both application parts before an innovation loan will be offered. Final terms of the loan offer will be decided by the Innovate UK Loans Ltd credit committee.

We will evaluate the suitability of your business to receive an offer of a loan for your project. This will follow a portfolio approach as detailed in the competition process in the guidance.

Read the general guidance for applicants carefully before you apply. It contains important information on how to prepare and submit an application and will help your chances of submitting a quality application.

Background and further information

This competition is part of the £50 million pilot Innovation Loans scheme introduced in autumn 2017 through Innovate UK. Innovation loans will be made through Innovate UK Loans Ltd, a wholly owned subsidiary of Innovate UK.

The Innovation Loans scheme aims to provide finance that is affordable, patient and flexible for later-stage innovation projects that have a clear route to commercial success. They are aimed at innovative micro, small and medium sized businesses who will be able to manage a loan, but who struggle to access finance from commercial lenders or schemes backed by the British Business Bank.

If you need more information, contact the competition helpline on 0300 321 4357 or email us at

Need help with this service? Contact us