Defence Innovation Loans

Key Features

Loans of up to £1.6m with a below market interest rate of 7.4% per annum to help convert your mature defence innovation into a strong business proposition for defence procurement.

Programme:     DASA

Award:     Share of up to £1.6m

Opens: 24th Jun 2021

Closes: 11th Aug 2021

! This scheme is now closed


The Defence and Security Accelerator supported by Innovate UK Loans Ltd are working together to offer a new Defence funding competition: the Defence Innovation Loan, which currently has £10M available to fund Innovative Defence solutions.

What are DASA looking for?

The Defence Innovation Loan is open to innovative ideas to improve the Defence of the UK. Potential solutions may cover any technology area and address any Defence need.

Supplier proposals must include evidence of:

  • a high quality later-stage R&D project with viable opportunity for growth
  • a suitable team, with strong management and delivery approach to the project
  • a strong defence requirement for the capability
  • a clear route to commercial success and focus on growth or scale up
  • a plan to cover interest payments on a quarterly basis
  • a plan to repay the loan within 7 years of contract award
  • why public funding is required in order to be able to carry out the project
  • an explanation of why you are unable to fund the project from your own resources or other forms of private-sector funding
  • clear evidence of development of a new and innovative product, process or service which is significantly ahead of anything similar in the field
  • 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
  • a project plan which adheres to the terms of the loan (i.e. Projects can last up to 4 years, of which up to 2 years can focus on late-stage R&D and up to 2 more years can be spent establishing a clear route to commercial success)


To take on a Defence Innovation Loan for a project you must:

  • be a UK registered SME
  • intend to exploit the results in the UK or overseas to make a significant and positive impact on the UK economy and/or productivity
  • give evidence that your business is suitable to take on a loan

Only SMEs are eligible to apply for Defence Innovation Loans; individuals, academic institutions, research organisations and large companies are not eligible. Only single businesses can receive innovation 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.



For this category DASA are not interested in proposals that:

  • have not shown a strong Defence requirement and capability need
  • are 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
  • have not provided an appropriate and evidenced Innovation Loan request
  • have not shown a clear route to commercial success with potential to make a significant and positive impact on UK Defence
  • ask for a loan of less than £250,000 or greater than £1.6M
  • are not highly innovative research and development projects
  • are consultancy, paper-based studies, market surveys or literature reviews
  • are Projects which purely conduct data science / analytics
  • are PhD proposals
  • are Projects that simply demonstrate or purchase existing equipment or off-the shelf products, without undertaking further development of technology or techniques to meet the challenges proposed (unless applied to this challenge in a novel way)
  • are Projects that offer no viable long-term prospect of integration into defence capabilities
  • are Projects which are already being developed elsewhere within UK defence

What should be included?

There are two elements to the Defence Innovation Loan application:

  • Innovation Proposal – submitted through the DASA submission service.
  • Innovation Loan Request Application (Business and Financial Assessment) – submitted through Innovate UK, detailed guidance on the application process can be found here.

Funding Costs

There is currently £10M available to fund Innovative Defence solutions. Loans of between £250,000 and £1.6M will be offered; proposals requesting loans outside of these amounts will be ineligible and will not be considered. The amount offered is based on your project proposal and Innovate UK’s 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 2 years to cover project development costs when the project is under way, but the exploitation has not yet started (the ‘availability period’). You can borrow in stages (‘drawdowns’) quarterly in advance 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 that will be considered and, since the overall term of the loan must not exceed 7 years, your application should propose how long your project will last and how long the repayment period should be.