What are innovation loans?

Innovation loans are a financial product offered by Innovate UK. They are for UK businesses that want to scale up and grow through innovation, developing new or improved products, processes or services.

Through innovation loans, Innovate UK aims to give businesses support to gain the competitive edge and also grow the UK economy.

Loans may be offered where a business can demonstrate they are suitable and eligible.

They are for late-stage research and development (R&D) projects only. A late-stage R&D project is one which builds on a new idea but has not yet reached the point of commercialisation.

It may include activities such as prototyping, demonstrating, piloting, testing and validation in environments that are representative of real-life operating conditions.

Innovation loans are aimed at UK-based small or medium-sized enterprises (SMEs) that can show that they can afford the interest and repayments on the loan and that they cannot obtain finance from other sources such as banks and equity investors.

Innovate UK is running a pilot programme of loan competitions over 2 years to the end of 2019. A total of up to £50 million is available for business innovation projects.

Interest will be set for the term of all loans at the opening of each loan competition, using the discount rate for financial transactions set by HM Treasury in Public Expenditure Statistical Analyses. Currently, this is 3.7% per year.

Loans will be made by Innovate UK Loans Ltd, a wholly-owned subsidiary of Innovate UK.

What you can use a loan for

You can use a loan to finance a late-stage research and development project categorised as experimental development.

Experimental development includes:

  • producing plans, arrangements and designs for your products, processes or services
  • developing commercially-usable prototypes and pilots
  • experimental production and testing of products, processes and services

Experimental development does not include routine or periodic changes to products, production lines, manufacturing processes, existing services and other operations in progress, even if such changes may represent improvements.

Who can apply

To be eligible for an innovation loan you must:

  • be an SME
  • be UK-based
  • be planning a project that fits with the defined scope of the specific loan competition you are applying into
  • apply alone. Only single SMEs may apply

Individuals, research organisations and large companies are not eligible. Collaboration with other organisations cannot be funded through a loan.

Opportunities to apply

There will be 5 opportunities for businesses to apply for an innovation loan. Up to £10 million will be available in each loan competition.

These pilot loan competitions may be:

  • themed, where your application will need to fit with specific scope criteria
  • open to any type of experimental development innovation project

Innovation loan competitions will be spaced out over 2 years and run to the end of 2019.

More details on the loan competitions will be made available here as these are confirmed.

If you’re not sure if you’re eligible, speak to customer support services on 0300 321 4357 or support@innovateuk.gov.uk