Capital usage: This refers to the finance required for any capital assets needed to move from R&D into commercial delivery, such as:

• machinery
• tools
• buildings
• technology

This includes physical assets used during or beyond the project period to help turn R&D results into a commercial product or service. It may apply particularly where such assets cannot be financed through commercial funders. It may also include cases where adaptations are required to deliver innovation that could affect the future value of the asset.

Tooling and materials: Including related costs for activities that support progression from R&D to commercial deployment.

This includes:

• tools, equipment modifications, and materials required to develop working prototypes or demonstrations that showcase the functionality of R&D outcomes in real world, business ready environments
• production of initial inventory or pilot batches to support regulatory validation, user testing, or early customer engagement
• costs associated with adapting designs for manufacturability or scaling up production processes, for example, tooling for low rate initial production or first off units
• development of packaging, labelling, or integration components needed to deliver the product or service in a commercial context
• activities that reduce technical or market risk for early adoption, such as trial deployments, pilot implementations, or limited market introductions to gather real world feedback before full scale launch

An element of working capital: This could be funds needed to cover day to day costs such as:

• salaries
• materials
• supplier payments
• marketing
• regulatory support and can be included where it supports the exploitation of the innovation

This must not exceed 20% of the total loan amount or the commercialisation work package.

You are responsible for entering your own project costs in the application and demonstrating the costs are justified and value for money.

It is your responsibility to ensure compliance with subsidy control rules. Full details are provided in the Guidance for Applicants and Project Finance Guide.

You must only include eligible project costs in your application. For specific guidance, see the eligibility section in this competition.

More information on the different types of organisation can be found in our Funding rules.

Subcontractors

Subcontractors are allowed in this competition.

Subcontractors can be from anywhere in the UK and you must select them through your usual procurement process.

You can use subcontractors from overseas but must make the case in your application as to why you cannot use subcontractors from the UK.

You must provide a detailed rationale, evidence of the potential UK contractors you approached and the reasons why they were unable to work with you. We will not accept a cheaper cost as a sufficient reason to use an overseas subcontractor.

All subcontractor costs must be justified and appropriate to the total project costs.

Number of applications

Your business can only submit one application per round of this competition. If you submit more than one application, only the first application will be considered for assessment.

You cannot submit an application in this competition at the same time as submitting an application in any other innovation loans or DASA defence innovation loans competition.

Sanctions

This competition will not fund you, or provide any financial benefit to any individual or entities directly or indirectly involved with you, which would expose Innovate UK or any direct or indirect beneficiary of funding from Innovate UK to UK Sanctions. For example, through any procurement, commercial, business development or supply chain activity with any entity as lead, partner or subcontractor related to these countries, administrations and terrorist groups.

Use of animals in research and innovation

Innovate UK expects and supports the provision and safeguarding of welfare standards for animals used in research and innovation, according to best practice and up to date guidance.

Any projects selected for funding which involve animals will be asked to provide additional information on welfare and ethical considerations, as well as compliance with any relevant legislation as part of the project start-up process. This information will be reviewed before an award is made.

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

Exclusion

In this competition we are not providing grant funding.

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

Innovate UK cannot fund projects that are:

• dependent on export performance, for example, giving a subsidy to a baker on the condition that it exports a certain quantity of bread to another country
• dependent on domestic inputs usage, for example, giving a subsidy to a baker on the condition that it uses 50% UK flour in their product

Funding Costs

Up to £25 million has been allocated to fund innovation projects across the current rounds of this competition.

Innovate UK will offer loans of between £100,000 and £5 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 consist of two distinct phases: a project period of up to five years, and a repayment period of up to five years. The total loan term must not exceed seven years, so you must structure the duration of each phase accordingly. You must ensure there is sufficient time after the R&D and pre-commercialisation phases to reach the initial stage of full commercial exploitation.

The project period starts from the first loan drawdown and continues until the point of first commercial exploitation. This period typically includes the R&D activities (which should be completed within the first three years) and may also include a pre-commercialisation work package. You must allow time after the R&D and pre-commercialisation to begin full commercial exploitation.

Loan drawdowns are quarterly during the project period. Interest will be charged at 3.7% per annum on the drawn amounts. An additional 3.7% per annum in deferred interest will also accrue on the principal but will not be payable until the repayment period begins.

The repayment period begins immediately after the project period ends and can last for up to five years. During this time, you will be required to repay the full loan amount, including any deferred interest, on a quarterly basis. Interest will be charged at 7.4% per annum on the outstanding loan balance.

The overall term of the loan must not exceed seven years and you must structure the duration of the project period and the repayment periods accordingly. You must ensure you leave enough time from completion of the project and any pre-commercialisation activities to get to your first commercial sale.

These periods must 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.

By way of an example, if the project requires three years of research and development and pre-commercialisation activity to get to market, then the maximum time available for the loan repayment would be four years.

Innovate UK expect to take security in the form of a debenture. Innovate UK 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 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. The present value is determined at the date of commitment of the loan.

For experimental development projects which are nearer to market, you can get funding for your eligible project costs of:

• up to 45% if you are a micro or small organisation
• up to 35% if you are a medium sized organisation
• up to 25% if you are a large organisation

For more information on company sizes, please refer to the company accounts guidance.

If you are applying for an award funded under State aid Regulations, the definitions are set out in the European Commission Recommendation of 6 May 2003.

Innovate UK may revoke our decision to provide funding without notice if government commitment for this initiative is withdrawn.