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Innovation continuity loans: Strand 2 September 2020 follow-on competition


Innovate UK is offering up to £210million in loans to micro, small and medium-sized enterprises (SMEs) and third sector organisations that have a challenge in continuing, completing or following on an innovation project.

Loans are for organisations that find themselves facing a sudden shortage or even unavailability of funds resulting directly from the COVID-19 pandemic.

There are two parallel strands for innovation continuity loans:

Innovate UK are looking to support highly innovative late stage projects with 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. Innovate UK will give priority to proposals likely to lead to growth and gains in productivity.

You must be able to show that you:

  • Are facing a sudden shortage or even unavailability of funds resulting directly from the COVID-19 pandemic
  • Can cover interest payments
  • Will be able to repay the loan on time
  • Need public funding

Innovate UK expect to open one or more further competitions monthly to allow applicants the opportunity to apply at a time that suits their organisation’s needs. Innovation continuity loans will be available for commitment until 31 December 2020.

Loans of between £250,000 and £1.6million are available.

Open Date:


Close Date:


The purpose of this competition is to help businesses and third sector organisations overcome barriers to their innovations becoming a successful, commercial reality, particularly where they find themselves facing a sudden shortage or even unavailability of funds resulting directly from the COVID-19 pandemic.

Your proposed project must follow on from a recently completed project supported by an award from Innovate UK ending within the last 36 months. Innovate UK are looking for organisations who can demonstrate that their recently completed projects with Innovate UK have made the best progress in innovation and that their follow-on projects have the best potential for the future.

Your proposal must demonstrate:

  • A clear game-changing and/or 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.

Innovate UK are looking to fund a portfolio of projects and organisations, across a variety of technologies and markets.

Projects can last up to four years, of which up to the first two years can focus on research and development (R&D), and up to two further years on establishing a clear route to commercial success. Innovate UK will require loan repayments over a further period of up to five years. However, the overall term of the loan must not exceed seven years.

Your application will be evaluated on:

  • The quality of your previously completed project with Innovate UK including completion of an independent accountants report (IAR)
  • Innovate UK’s satisfaction with the delivery of that project, evidenced by our own reporting
  • The quality of your project proposal and how it enhances the output of your previous project
  • Innovate UK’s judgement on the suitability of your organisation to receive an offer of a loan

Innovate UK will decline loans for organisations which:

  • They 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

Specific themes

Innovate UK are looking for applications that show:

  • An appropriate and evidenced loan request
  • A clear route to commercial success with clear, considerable potential to make a significant and positive impact on the UK economy and/or productivity
  • Realistic, significant potential for global markets
  • A strong management team
  • A strong rationale for how your project enhances the output of a recently completed project supported by an award from Innovate UK
  • Evidence of impact from the COVID-19 pandemic such as reduced access to capital, cancelled orders or increases to your costs
  • Why you are unable to fund the project from your own resources or other forms of public or private-sector funding amid the current financing disruptions caused by the COVID-19 pandemic
  • That this funding will enable the project to be carried out despite the impact of the COVID-19 pandemic.

Loans of between £250,000 and £1.6million are available to fund your project’s eligible costs. Innovate UK may consider further reasonable costs arising from an increase in the cost of delivering your R&D activity as a result of COVID-19 that are not already covered by other government support.

Projects must last up to four years and are expected to start by 31 December 2020.

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

  • Be a UK-registered SME or third sector organisation
  • Have successfully completed a project supported by an Innovate UK award in the last 36 months
  • Carry out your project in the UK
  • Intend to exploit the results from or in the UK
  • Give evidence that your organisation is suitable to take on a loan

Individuals, academic institutions, research organisations and large companies are not eligible for innovation loans.

Only single businesses or third sector organisations 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.

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

You can use a previously submitted application to apply for this competition.

Innovate UK will not award you funding if you have:

  • Failed to exploit a previously funded project
  • An outstanding independent accountants report
  • Failed to comply with grant terms and conditions

Previous funded projects

Under the terms of Innovate UK funding, you must submit an independent accountant’s report (IAR) with your final claim. If you or any organisation in your consortium failed to submit an IAR on a previous project, Innovate UK will not award funding to you in this or any other competition until they have received the documents.

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, Innovate UK will award no more funding to you, in this or any other competition. You will not be able to contest their decision.

Innovate UK have allocated up to £210million for innovation continuity loans and will accept applications in a series of competitions.

Innovate UK will offer loans of between £250,000 and £1.6million. This is based on your project proposal and our judgement of the suitability and affordability of a loan for your organisation. The Innovate UK Loans Ltd credit committee will decide the final terms, amount and length of the loan offer.

Innovation continuity loans will be:

  1. Available for up to two years (the ‘availability period’) until the agreed end date of your project, provided that no drawdowns will be permitted after 31 March 2022. 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 until the first commercial sales from the results of the project, up to a maximum of two 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.
  3. Repayable over a maximum of five 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 Innovate UK will consider and since the overall term of the loan must not exceed seven years, 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 organisation. Innovate UK will consider the suitability of your proposed timings in any loan offer that they make to you.

Innovate UK expect to take security where it is available in the form of a mortgage debenture. Innovate UK will not require personal guarantees.

State aid

Innovation continuity loans are a form of State aid under the COVID-19 Temporary Framework for the UK.

You could get a loan of up to 100% of your project costs and other, justified, R&D related 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. 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 the European Commission’s reference rates for interest) and the cost of an innovation continuity loan.

Aid may be granted to undertakings that were not in difficulty (within the meaning of Article 2(18) of the General Block Exemption Regulation) on 31 December 2019, but that faced difficulties or entered in difficulty thereafter as a result of the COVID-19 outbreak. The Temporary Framework has been extended to provide public support to micro and small companies in difficulty. Micro and small companies are exempt from this test unless:

  • They are in insolvency proceedings
  • Have received rescue aid that has not been repaid
  • Or are subject to a restructuring plan under State aid rules

Unless you are exempt as a micro or small company, you must complete a State aid declaration in the Early Metrics Survey to confirm that your organisation was not an undertaking in difficulty on 31 December 2019.

The cumulative aid that any organisation may receive under the Temporary Framework must not exceed 800,000 euros in total. For undertakings in the agriculture and fisheries sector, the aid limits are lower: 120,000 euros per undertaking active in the fishery and aquaculture sector or 100,000 euros per undertaking active in the primary production of agricultural products.

The gross grant equivalent of an innovation continuity loan will count towards these limits. Innovate UK expect that most innovation loans, on their own, will meet this requirement. Any aid provided under de minimis is in addition to this allowance. If you are unsure if any previous funding fell under the Temporary Framework, please contact the funding body who issued you with your award.

All applicants must provide a simple declaration to this effect.

Please refer to the:

It is your responsibility to make sure that your organisation is eligible to receive state aid. Innovate UK strongly recommend that you seek independent legal advice before applying into, and accepting the terms of, this funding award.

In this competition, Innovation UK are not providing Innovation continuity loans to organisations:

  • To continue and complete a live project with an Innovate UK award
  • To carry out entirely new project activity

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

Cresco Innovation works with companies to develop and implement innovation strategies. We help client companies identify opportunities to develop new products and services, and then create a package of support to ensure that the idea is turned into a commercial reality.

Our services include securing grants (as a team we have raised around £40million over three years), business planning, IP advice, access to finance and funders, project management and IP commercialisation support.

We regularly act as the interface with the funding bodies and help clients ensure that their projects are properly managed to ensure the best outcome for all.

Call to find out more

If you’d like to know more about this competition, please give us a call on 01509 261182 and one of our team will be delighted to help you access this funding opportunity for your business.