Funding competition Innovation loans: September 2019 open competition

Loans for game-changing innovations with strong commercial potential that will significantly improve the UK economy.

This competition is now closed.

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Competition sections

Description

Innovate UK is offering up to £10 million in loans to micro, small and medium-sized enterprises (SMEs). Loans are for highly innovative late stage projects with the best game changing and/or disruptive ideas or concepts. There should be a clear route to commercialisation and economic impact.

Your project should aim to develop new products, processes or services which are significantly ahead of anything similar in the field. You can also propose an innovative use of existing products, processes or services.

Your proposal can use any technology from any part of the economy.

Your project must focus on commercialisation, growth or scale up. We will give priority to proposals likely to lead to growth and gains in productivity.

You must be able to show that you:

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

The competition closes at midday 12pm UK time on the deadline stated.

Funding type

Loan

Project size

Loans of between £100,000 and £1 million are available.

Who can apply

State aid

Any UK business claiming funding must be eligible to receive state aid at the time we confirm you will be awarded funding. If you are unsure please take legal advice. For further information see our general guidance.

Your project

Loans of between £100,000 and £1 million are available to fund your project’s eligible costs.

Projects must last up to 5 years and are expected to start by May 2020.

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

  • be a UK registered SME
  • carry out your project 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

Individuals, academic institutions, 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.

Multiple applications

Your organisation can only submit one application per competition round. If you submit more than one application, only the first application will be considered for assessment.

Previous applications

Resubmissions

You can use a resubmission to apply for this competition. A resubmission is a proposal Innovate UK judges as not materially different from one you have submitted before. It can be updated based on the assessors' feedback.

If you submit a new proposal this time you will be able to use it in no more than one future competition that allows resubmissions.

Failure to exploit

If you applied to a previous competition as the lead or sole organisation and were awarded funding by Innovate UK or UK Research and Innovation, but did not make a substantial effort to exploit that award, we will award no more funding to you, in this or any other competition. You will not be able to contest our decision. We will:

  • assess your efforts in the previous competition against your exploitation plan for that project
  • review the monitoring officers’ reports and any other relevant sources for evidence
  • document our decision, which will be made by 3 team members, and communicate it to you in writing

Funding

We have allocated up to £10 million in this competition to fund innovation projects 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:

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 at 3.7% per annum on anything you borrow, with additional interest at 3.7% accrued and deferred until the repayment period.

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 at 3.7% per annum, with additional interest at 3.7% accrued and deferred until the repayment period.

3. 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 terms and conditions 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.

Your proposal

The purpose of this competition is to help businesses overcome barriers to their cutting-edge innovations becoming a successful, commercial reality. The aim is to make a considerable economic impact and/or result in significant, sustainable business growth.

Your idea must lead to innovative products, processes or services that are significantly ahead of others in the field. Your project can include prototyping, demonstrating, piloting, testing and validation in environments that represent real life operating conditions.

Your proposal must demonstrate:

  • a clear game-changing and/or disruptive innovative idea
  • a strong and deliverable business plan that addresses (and documents) market potential and needs
  • a team, business arrangement or working structure with the necessary skills and experience to run and complete the project successfully and on time
  • awareness of all the main risks the project will face, with realistic management, mitigation and impact minimisation plans for each
  • sound, practical financial plans and timelines that represent good value for money
  • 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.

We are looking to fund a portfolio of projects and businesses, across a variety of technologies and markets.

Projects should last up to 5 years, of which up to 3 years can focus on late stage research and development (R&D), and up to 2 more years on establishing a clear route to commercial success. We will require loan repayments over a further period of up to 5 years

We will decline loans for businesses which:

  • we consider unable to afford the interest and repayments on the loan
  • have not demonstrated that they are unable to obtain finance from other sources on suitable terms
We will evaluate whether your business is suitable to receive an offer of a loan for your project.

Specific themes

Your proposal must demonstrate:

  • a clear, considerable potential to make a significant and positive impact on the UK economy and/or productivity
  • realistic, significant potential for global markets

Research categories

Projects we will not fund

In this competition we are not providing grant funding.

We will not provide funds to match the grant funding of any other projects.

23 September 2019
Competition opens
21 October 2019
London briefing event recording
22 October 2019
Newport briefing event
23 October 2019
Coventry briefing event
23 October 2019
Malvern briefing event
24 October 2019
Gateshead briefing event
4 November 2019
Edinburgh briefing event
6 November 2019
Belfast briefing event
6 November 2019
Londonderry briefing event
8 November 2019
Cambridge briefing event
8 November 2019
Colchester briefing event
27 November 2019
Close date. Midday 12pm
27 November 2019 12:00pm
Competition closes
24 January 2020
Applicants notified
31 May 2020
Expected project start date and start of drawdowns

Before you start

We will not accept late submissions. Your application is confidential.

Entering into a loan agreement with us is a financial commitment. You 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 you will be able to fulfil the repayment obligations under the loan. You should take 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 do 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.

In the application process (and as part of the loan agreement) we will require you, or the person appointed by your company to act for it, to enter into a legally binding declaration. You should take independent advice on the content of this declaration.

An application for an innovation loans competition needs different information from one for a grant application. Even if you have applied for funding from Innovate UK before, you are strongly advised to read the innovation loans guidance before completing your application.

What we will ask you

There are 2 parts to applications:

A. Quality of the project: this will be assessed by independent experts based on your answers to part A of the application and the finances you enter when setting up your project

B. Suitability of the business to receive a loan: this will be evaluated by our credit team based on your answers to the Early Metrics startup high growth index survey and your historic and forecast financial statements.

You need to be successful in both application parts before we will offer an innovation loan. The Innovate UK Loans Ltd credit committee will decide the final terms of the loan offer.

1. Project details

Business overview and project summary

Briefly describe your business, and its current position in the marketplace. Describe the company vision for growth and how you plan to achieve this. Describe your project briefly, and be clear about what makes it innovative. We use this section to assign experts to assess your application.

Your answer can be up to 400 words long.

Public description

Describe your project in detail, and in a way that you are happy to see published. Do not include any commercially sensitive information. If we award your project funding, we will publish this description. This could happen before you start your project.

Your answer can be up to 400 words long.

Scope

Describe how your project fits the scope of the competition. If your project is not in scope it will not be eligible for funding. Your answer can be up to 400 words long.

2. Application questions

The assessors will score your answers. You will receive feedback from them for each one.

Your answer to each question can be up to 400 words long. Do not include any URLs in your answers.

Question 1. Need or challenge

What is the business need, technological challenge or market opportunity behind your innovation?

Describe or explain:

  • the main motivation for the project
  • the business need, technological challenge or market opportunity
  • the nearest current state-of-the-art, including those near market or in development, and its limitations
  • any work you have already done to respond to this need, for example if the project focuses on developing an existing capability or building a new one
  • the wider economic, social, environmental, cultural or political challenges which are influential in creating the opportunity, such as incoming regulations, using our Horizons tool if appropriate

Question 2. Approach and innovation

What approach will you take and where will the focus of the innovation be?

Describe or explain:

  • how you will respond to the need, challenge or opportunity identified
  • how you will improve on the nearest current state-of-the-art identified
  • whether the innovation will focus on the application of existing technologies in new areas, the development of new technologies for existing areas or a totally disruptive approach
  • the freedom you have to operate
  • how this project fits with your current product, service lines or offerings
  • how it will make you more competitive
  • the nature of the outputs you expect from the project (for example report, demonstrator, know-how, new process, product or service design) and how these will help you to target the need, challenge or opportunity identified
  • the current level of readiness, how it is likely to change over the life of the project and how it is likely to lead to project success

You can submit one appendix. It can include diagrams and charts to help support your answer. It must be a PDF and can be up to 2 pages long. The font must be legible at 100% zoom.

Question 3. Team and resources

Who is in the project team and what are their roles?

Describe or explain:

  • the roles, skills and experience of all members of the project team that are relevant to the approach you will be taking
  • the resources, equipment and facilities needed for the project and how you will access them
  • the details of any vital external parties, including sub-contractors, who you will need to work with to successfully carry out the project
  • any roles you will need to recruit for
  • the resources available to take the project to market after the development period, including any commercial officers, sales people or marketers

You can submit one appendix. It can contain a short summary of the main people working on the project to support your answer. It must be a PDF and can be up to 4 pages long. The font must be legible at 100% zoom.

Question 4. Market awareness

What does the market you are targeting look like?

Describe or explain:

  • the markets (domestic, international or both) you will be targeting in the project and any other potential markets
  • the size of the target markets for the project outcomes, backed up by references where available
  • the structure and dynamics of the target markets, including customer segmentation and market regulation, together with predicted growth rates within clear timeframes
  • the target markets’ main supply or value chains and business models, and any barriers to entry that exist
  • the current UK position in targeting these markets
  • the size and main features of any other markets not already listed
  • If your project is highly innovative, where the market may be unexplored, describe or explain:
  • what the market’s size might to be
  • how your project will try to explore the market’s potential

Question 5. Outcomes and route to market

How are you going to grow your business and increase your productivity into the long term as a result of the project?

Describe or explain:

  • your current position in the markets and supply or value chains outlined, and whether you will be extending or establishing your market position
  • your target customers or end users, and the value to them, for example why they would use or buy your product

  • your route to market
  • how you are going to profit from the innovation, including increased revenues or cost reduction
  • the approach you will take to commercialise the outputs from the project
  • how the innovation will affect your productivity and growth, in both the short and the long term
  • how you will protect and exploit the outputs of the project, for example through know-how, patenting, designs or changes to your business model
  • your strategy for targeting the other markets you have identified during or after the project

Question 6. Wider impacts

What impact might this project have outside the project team?

Describe, and where possible measure:

  • the economic benefits from the project to external parties, including customers, others in the supply chain, broader industry and the UK economy, such as productivity increases and import substitution
  • any expected impact on government priorities
  • any expected environmental impacts, either positive or negative
  • any expected regional impacts of the project

Describe any expected social impacts, either positive or negative on, for example:

  • quality of life
  • social inclusion or exclusion
  • jobs, such as safeguarding, creating, changing or displacing them
  • education
  • public empowerment
  • health and safety
  • regulations
  • diversity

Question 7. Project management

How will you manage the project effectively?

Describe or explain:

  • the main work packages of the project, indicating the total cost of each one
  • how the project relates to each stage of the innovation loan and how it will be managed. This should cover the availability period (when expenditure on R&D will occur and the loan will be drawn down), the extension period (when the commercialisation will occur, but no further loan drawdowns will be permitted) and the repayment period (when the loan will be repaid)

  • your approach to project management, identifying any major tools and mechanisms you will use to get a successful and innovative project outcome
  • the management reporting lines
  • your project plan in enough detail to identify any links or dependencies between work packages or milestones

You can submit a project plan or Gantt chart as an appendix to support your answer. It must be a PDF and can be up to 2 pages long. The font must be legible at 100% zoom.

Question 8. Risks

What are the main risks for this project?

Describe or explain:

  • the main risks and uncertainties of the project, including the technical, commercial, managerial and environmental risks, providing a risk register if appropriate
  • how you will mitigate these risks
  • any project inputs that are critical to completion, such as resources, expertise, data sets
  • any output likely to be subject to regulatory requirements, certification, ethical issues and so on, and how you will manage this

You can submit a risk register as an appendix to support your answer. It must be a PDF and can be up to 2 pages long. The font must be legible at 100% zoom.

Question 9. Added value

What impact would an innovation loan have on the project and your business?

Describe or explain:

  • if this project could go ahead in any form without the innovation loan and if so, the difference the loan would make, such as a faster route to market or reduced risk
  • the likely impact of the project on your business
  • why you are not able to wholly fund the project from your own resources or other forms of private-sector funding, and what would happen if the application is unsuccessful
  • how this project would change the nature of R&D activity you would undertake, and the related spend

Question 10. Costs and value for money

How much will the project cost and how does it represent value for money for your business and the taxpayer?

Describe or explain:

  • the total eligible project costs and the loan you are requesting in terms of the goals of the project and your business
  • how you will finance your contributions to the project
  • how this project represents value for money for you and the taxpayer
  • how it compares to what you would spend your money on otherwise
  • any sub-contractor costs and why they are critical to the project

Question 11. Your business plan

What is your business plan? Please note that this question is not scored but will provide useful background information for the assessors and credit committee who will consider your application.

You should provide a summary or overview or your business plan.

You can submit a summary business plan or business overview presentation as an appendix to support your answer. It must be a PDF and can be up to 20 pages long. The font must be legible at 100% zoom.

3. Finances

For full details on what costs you can claim please see our project costs guidance.

Background and further information

This is the second in an extension to the 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 or need to raise funds alongside offers from commercial lenders or schemes backed by the British Business Bank.

If you need more information, email us at support@innovateuk.ukri.org or call the competition helpline on 0300 321 4357 between 9am and 5:30pm, Monday to Friday.

You should read the UK Research and Innovation privacy notice to understand how we handle your personal data.

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