We have allocated up to £10 million to fund innovation projects in this competition through innovation loans to suitable SMEs.
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:
- 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 at 3.7% per annum on anything you borrow, with additional interest at 3.7% accrued and deferred until the repayment period.
- 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 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. 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.
We expect to take security where it is available, including a mortgage debenture and charges 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 for this competition.
This competition provides state aid funding under article 25, ‘Aid for research and development and innovation’, of the General Block Exemption Regulation (GBER). It is your responsibility to make sure that your organisation is eligible to receive state aid.
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 general guidance on innovation loans contains more information to explain the grant equivalent calculation for an innovation loan.