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Innovation loans: April 2021 open competition


Businesses can apply for loans for innovative projects with strong commercial potential to significantly improve the UK economy.

Innovate UK is offering up to £20million 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. Innovate UK 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 £1.6million are available.

Open Date:


Close Date:


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.

Innovate UK 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:

  • Prototyping
  • Demonstrating
  • Piloting
  • Testing
  • Validation in environments that represent real life operating conditions.

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

Projects can last up to four years, of which up to two years can focus on late-stage research and development (R&D). Up to two more years can be spent 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 Innovate UK’s:

  • Assessment of the quality of your project proposal
  • Judgement on the suitability of your business to receive an offer of a loan

Innovate UK will decline loans for businesses 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

Innovate UK will evaluate whether your business is suitable to receive an offer of a loan for your project.

Specific themes

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

Loans of between £250,000 and £1.6million are available to fund your project’s eligible costs.

Projects can last up to four 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.

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:

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. Innovate UK will conduct financial viability and eligibility tests to confirm this is not the case as part of their evaluation of the suitability of your business to take on a loan.

EU State aid rules now only apply in limited circumstances. Please see the 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 the 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. Innovate UK will ask for evidence of this.

Further information

If you are unsure about your obligations under the UK Subsidy Control regime or the State aid rules, you should take independent legal advice. Innovate UK 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 Innovate UK need to change the terms of this competition, they will tell you as soon as possible.

Innovate UK have allocated up to £20million in this competition as an extension to the innovation loans pilot programme.

Innovate UK will offer loans of between £250,000 and £1.6million. This is based on your project proposal and their 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:

  1. Available for up to two 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.
  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 (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. 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 in the form of a mortgage debenture. Innovate UK will not require personal guarantees.

More details of Innovate UK’s 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

Innovate UK 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.

In this competition, Innovate UK are not providing grant funding.

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

Innovate UK are not funding projects that are:

  • Dependent on export performance
  • Dependent on domestic inputs usage

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.