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Innovation Loans Future Economy Competition – Round 4 UK registered businesses can apply for loans for innovative projects with strong commercial potential to significantly improve the UK economy. Eligibility This competition is open to single SME applicants registered in the UK. Opening soon Opens: 9 June 2022 Closes: 13 July 2022

Programme: Innovate Uk

Award:

Opens: 9 June 2022

Closes: 13 July 2022

Description

Innovate UK is offering up to £25 million in loans to micro, small and medium sized enterprises (SMEs). Loans are for highly innovative late stage research and development (R&D) projects with the best potential for the future. There should be a clear route to commercialisation and economic impact.

Your project must lead to new products, processes or services that are significantly ahead of others currently available or propose an innovative use of existing products, processes or services. It can also involve a new or innovative business model.

We are particularly interested in projects that focus on the future economy areas included in the Innovate UK plan for action.

You must be able to show that you:

  • need public funding
  • can cover interest payments
  • will be able to repay the loan on time

The funding available will be allocated across a series of competitions with the next round opening on the day the previous round closes. This is round 4, the final round in the current series.

In applying to this competition, you are entering into a competitive process. This competition closes at 11am UK time on the deadline stated.

Funding type

Loan

Project size

Loans can be for between £100,000 and £2 million.

Who can apply

Your project

You can apply for a loan of between £100,000 and £2 million to fund your project’s eligible costs.

Projects can last up to 5 years, including both the R&D and commercialisation phases. Projects are expected to start by 24 October 2022.

To receive an innovation loan for a new project you must:

  • be a UK registered micro, small or medium-sized enterprise (SME)
  • carry out your project from or in the UK
  • intend to exploit the results from or in the UK
  • give evidence that your business is suitable to take on a loan

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

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

Only single businesses can receive loans, so collaboration with other organisations cannot be funded in this competition.

Under current restrictions, this competition will not fund any procurement, commercial, business development or supply chain activity with any Russian entity as lead, partner or subcontractor. This includes any goods or services originating from a Russian source.

Funding

Innovate UK has allocated up to £25 million to fund innovation projects across the four rounds of this competition.

We will offer loans of between £100,000 and £2 million, 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:

1. Available for up to 3 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 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.

3. 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 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 can 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.

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