Innovation loans: April 2021 open competition
Businesses can apply for loans for innovative projects with strong commercial potential to significantly improve the UK economy.
- Competition opens: Monday 26 April 2021
- Competition closes: Friday 4 June 2021 5:00pm
This competition is now closed.
Innovate UK is offering up to £20 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 disruptive ideas or concepts. There should be a clear route to commercialisation and economic impact.
Your project must 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.
Applications can come from any area of technology and be applied to 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
Loans of between £250,000 and £1.6 million are available.
Who can apply
Loans of between £250,000 and £1.6 million are available to fund your project’s eligible costs.
Projects can last up to 4 years, including both the R&D and commercialisation phases. Projects are expected to start by September 2021.
To take on an innovation loan for a project you must:
- be a UK registered SME
- 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.
For more information on company sizes, please refer to the company accounts guidance. This is a change from the EU definition unless you are applying under State aid.
Only single businesses can receive loans, so collaboration with other organisations cannot be funded in this competition.
Subcontractors are allowed in this competition and must be selected through a participant’s normal procurement process. Subcontractors can be from anywhere in the UK. If an overseas subcontractor is selected, a case must be made as to why no UK-based subcontractor can be used including a detailed rationale, evidence of UK companies that have been approached and reasons why they were unable to do so. A cheaper cost is not deemed as a sufficient reason to use an overseas subcontractor.
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.
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 outstanding independent accountant’s report from a previous project
- failed to comply with grant terms and conditions in a previous project
Subsidy control (and State aid where applicable)
This competition provides funding in line with the UK's obligations and commitments to Subsidy Control. Further information about the UK Subsidy Control requirements can be found within the EU-UK Trade and Cooperation agreement and the subsequent guidance from the department of Business, Energy and Industrial Strategy (BEIS).
Innovate UK is unable to award funding to organisations that are considered to be in financial difficulty. We will conduct financial viability and eligibility tests to confirm this is not the case as part of our evaluation of the suitability of your business to take on a loan.
EU State aid rules now only apply in limited circumstances. Please see our general guidance to check if these rules apply to your organisation.
European Commission State aid
You must apply under European Commission State aid rules if you are an applicant who is conducting activities that will affect trade of goods and electricity between Northern Ireland and the EU as envisaged by Article 10 of the Protocol on Ireland/Northern Ireland in the EU Withdrawal Agreement.
In certain limited circumstances, the European Commission State aid rules may also apply if you are an organisation located in England, Wales, or Scotland and conduct activities that affect the trade of goods and electricity between Northern Ireland and the EU. For further information, please see section 7 of the BEIS technical guidance.
For further information see our general guidance on state aid and BEIS guidance on the Northern Ireland Protocol.
For applicants subject to the European Commission State aid rules, applicants will be required to prove that they were not an “Undertaking in Difficulty” on the date of 31 December 2019 if they became a UID between 1 January 2020 and 30 June 2021. We will ask for evidence of this.
If you are unsure about your obligations under the UK Subsidy Control regime or the State aid rules, you should take independent legal advice. We are unable to advise on individual eligibility or legal obligations.
You must make sure at all times 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.
If there are any changes to the above requirements that mean we need to change the terms of this competition, we will tell you as soon as possible.
We have allocated up to £20 million in this competition as an extension to the innovation loans pilot programme.
We will offer loans of between £250,000 and £1.6 million. This is 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 2 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 and, since the overall term of the loan must not exceed 7 years, your application should propose how long your project (which includes the availability and extension periods) will last 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 in the form of a mortgage 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 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. The gross grant equivalent will be the present value, at the date of commitment of the loan, 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. 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.
The aim of this competition is to help businesses overcome barriers to their innovations becoming a successful, commercial reality. The loans are intended to support significant, sustainable business growth which results in considerable economic impact.
We are looking for businesses who can demonstrate their projects have the best potential to deliver future growth.
Your idea must lead to innovative products, processes or services that are significantly ahead of others in the field.
Your proposal must demonstrate:
- a clear game-changing and disruptive innovative idea
- a robust 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 and business will face, with realistic plans to manage, mitigate and minimise the impact of each of these
- 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.
Your project can include:
in environments that represent real life operating conditions.
We are looking to fund a portfolio of projects and businesses, across a variety of technologies and markets.
Projects can last up to 4years, of which up to 2 years can focus on late-stage research and development (R&D). Up to 2 more years can be spent establishing a clear route to commercial success.
We will require loan repayments over a further period of up to 5 years. However, the overall term of the loan must not exceed 7 years.
Your application will be evaluated on our:
- assessment of the quality of your project proposal
- judgement on the suitability of your business to receive an offer of a loan
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
Your proposal must demonstrate:
- an appropriate and evidenced loan request
- a clear route to commercial success with potential to make a significant and positive impact on the UK economy and productivity
- realistic, significant potential for global markets
- a strong management team
- why you are unable to fund the project from your own resources or other forms of public or private-sector funding
We will only fund experimental development projects.
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 projects.
We are not funding projects that are:
- dependent on export performance
- dependent on domestic inputs usage
- 26 April 2021
- Competition opens
- 20 May 2021
- Online briefing event: view recording
- 4 June 2021 5:00pm
- Competition closes
- 22 July 2021 3:30pm
- Applicants notified
- 23 July 2021
- Progress to detailed analysis notification
- 15 September 2021
- Project start date and start of drawdowns
Before you start
You must read the guidance on applying for a competition on the Innovation Funding Service before you start.
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 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.
The principles that Innovate UK follows when we collect, hold or use your personal information and how you can check what details we hold are set out in Innovate UK’s personal information charter.
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.
What we will ask you
The application is split into 3 sections:
- Project details. This includes a link to questions, in the format of a survey, that you must answer about your business and a financial spreadsheet template that you must fill in to provide financial information about your business for the full period of your loan request.
- Project questions.
- Project finances.
We will make our decision based on:
- Suitability of your business to receive a loan
This will be evaluated by our credit team based on your answers to the business questions and your historic and forecast financial statements. We will include the results of the Early Metrics start-up high growth index survey as part of this evaluation. We may need further information to reach a final decision, at which point we may contact you. We may decide against offering a loan if the information you provide does not make an adequate case for your suitability for a loan.
2. Quality of the project
This will be evaluated by independent experts based on your answers to the project questions in this application and the finances you enter when describing your project.
You must complete and submit all parts of the application.
You need to be successful in all parts of the application 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
The lead applicant must complete this section. Give your project’s title, start date and duration.
Is your company based in Northern Ireland and/or are you planning to undertake any work for which you are seeking Innovate UK funding in Northern Ireland?
Business and financial information
For us to consider the suitability of your business for a loan, we need detailed information about your business as well as financial information and forecasts
You must complete and submit:
- an online survey giving us information about your business
- a financial spreadsheet giving us financial information about your business
Once you have completed and submitted the survey and spreadsheet template you must select the ‘yes’ option.
Equality, diversity and inclusion
We collect and report on equality, diversity and inclusion (EDI) data to address under-representation in business innovation and ensure equality, diversity and inclusion across all our activities.
You must complete this EDI survey and then select yes in the application question. The survey will ask you questions on your gender, age, ethnicity and disability status. You will always have the option to ‘prefer not to say’ if you do not feel comfortable sharing this information.
Briefly describe your business and its current position in the marketplace. Describe your vision for growth and how you plan to achieve this. Describe your project briefly, and be clear about what makes it innovative.
Your answer can be up to 400 words long.
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.
Describe how your project fits the scope of the competition. If your project is not in scope it will be immediately rejected and will not be sent for assessment. We will give you feedback on why.
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 800 words long. Do not include any website addresses (URLs) in your answers.
Applicant location (not scored).
Your answer can be up to 400 words long. Please state the name of your organisation along with its full registered address.
Question 2. Project proposal
What is the business need, technological challenge or market opportunity behind your innovation? What approach will you take and where will the focus of the innovation be?
Describe or explain:
- the main motivation for the project
- the business need, technological challenge or market opportunity and how your project will respond to this
- how this project fits with your current product, service lines or offerings
- the wider economic, social, environmental, cultural or political challenges which are influential in creating the opportunity
- the nearest current state-of-the-art, including those near market or in development, and its limitations, how you will improve on this and your freedom to operate
- the nature of the outputs you expect from the project 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
- how the project will make you more competitive and lead to commercial success
- the impact COVID-19 has had on businesses or sectors that are a focus of your project
Question 3. Market opportunity
What does the market you are targeting look like and how are you going to grow your business as a result of the project?
Describe or explain:
- the markets (domestic, international or both) you will be targeting in the project and their size, structure and dynamics
- the target markets’ main supply or value chains and business models, and any barriers to entry that exist
- 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, particularly if COVID-19 has changed market dynamics
- how you are going to profit from the innovation, including increased revenues or cost reduction
Question 4. Project delivery
Who is in the project team, what are their roles and how will you manage the project effectively?
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, including any roles you will need to recruit for, and taking into account the impact of COVID-19 restrictions on the team structure
- the resources, equipment and facilities needed for the project and how you will access them, particularly in the light of any continuing COVID-19 restrictions
- the details of any vital external parties, including subcontractors, who you will need to work with to successfully carry out the project
- the resources available to take the project to market after the development period, including commercial resources
- the main work packages of the project, indicating the total cost of each one
- 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 and taking into account the possible impact of further COVID-19 restrictions
You must submit two appendices to support your response to this question.
You must submit an appendix containing 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 A4 pages long and no larger than 10MB in size. The font must be legible at 100% zoom.
You must 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 A4 pages long and no larger than 10MB in size. The font must be legible at 100% zoom.
Question 5. Project 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
- 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
- what methods of future proofing you have considered against risks arising from COVID-19 restrictions and other possible national and global factors
- any project inputs that are critical to completion, such as resources, expertise, data sets and if they are affected by COVID-19
You must submit a risk register as an appendix to support your answer. It must be a PDF, and can be up to 2 A4 pages long and no larger than 10MB in size. The font must be legible at 100% zoom.
Question 6. Project 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 relation to the goals of the project and your business
- 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 subcontractor costs and why they are critical to the project
- why you need this public sector support as well as any other support that you may have received and how this relates to the impact of the COVID-19 pandemic
Each organisation in your project must complete their own project costs, organisation details and funding details in the applicationFor full details on what costs you can claim see our project costs guidance.
Background and further information
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 about how to apply email email@example.com or call 0300 321 4357.
Our phone lines are open from 9am to 11:30am and 2pm to 4:30pm, Monday to Friday (excluding bank holidays).
Innovate UK is committed to making support for applicants accessible to everyone.
We can provide help for applicants who face barriers when making an application. This might be as a result of a disability, neurodiversity or anything else that makes it difficult to use our services. We can also give help and make other reasonable adjustments for you if your application is successful.
If you think you need more support, it is important that you contact our Customer Support Service as early as possible during your application process. You should aim to contact us no later than 10 working days before the competition closing date.
Support for SMEs from Innovate UK EDGE
If you receive an award, you will be contacted about working with an innovation and growth specialist at Innovate UK EDGE. This service forms part of our funded offer to you.
These specialists focus on growing innovative businesses and ensuring that projects contribute to their growth. Working one-to-one, they can help you to identify your best strategy and harness world-class resources to grow and achieve scale.
We encourage you to engage with Innovate UK EDGE, delivered by a knowledgeable and objective specialist near you.
Need help with this service? Contact us