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New innovation loans competition launch

As Innovate UK (previously the Technology Strategy Board) starts to offer a new scheme of loan finance for innovative businesses, ICAEW Head of Enterprise Clive Lewis answers the questions.

Clive Lewis

March 2018

The Innovate UK scheme, initially in the form of a pilot, offers a low cost, patient, flexible loan scheme aimed at supporting businesses with innovation projects that are near to market, where there is less risk involved. The pilot programme of up to £50m is available over two years.

What are innovation loans?

Innovation loans are for UK businesses that want to scale up and grow through innovation, developing new or improved products, processes or services. The loans are aimed at UK small- and medium-sized businesses that can demonstrate they can afford the interest and repayments on the loan. They must also show that they cannot obtain the finance from a bank or equity investors.

What can you use the loan for?

Loans can be used to finance late-stage research and development projects that meet the EC definition of experimental development including producing plans and designs for products processes or services, commercially usable prototypes and pilots and experimental production and testing of products.

How does an innovation loan work?

Businesses will need to successfully apply into one of Innovate UK loan competitions to obtain a loan. Winners of the competition could borrow between £100,000 and £1m to cover up to 100% of eligible project costs. Interest is charged on the amount borrowed and is currently 3.7% per annum.

The maximum loan period is 10 years. This breaks down into:

  • Availability period: up to three years, which is the period the business draws down money to facilitate research and development. During this period businesses do not have to make repayments.
  • Extension period: up to two years during which time the business establishes a clear route to market and commercialisation with up to two years available before repayments start
  • Repayment period: up to five years when the business will need to repay the loan. 

The programme will evaluate the project proposal to decide the amount of the loan. Innovate UK expects to take security, including over the assets financed through the loan. Personal guarantees are not required.

Finally, how do you apply?

To enter the competition or to find out more information go to the Innovate UK scheme website.

Clive Lewis is ICAEW Head of Enterprise.

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