Innovation loans - Innovate UK

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Costs we fund

You could get an innovation loan for up to 100% of your eligible project costs, as defined in the brief for the loan competition you wish to apply into.

The minimum and maximum amount of loan available to you will be specified in the specific competition you are applying into.

Money borrowed may be spent on the project only. Guidance on what costs are eligible and on how to complete the project costs information is provided in our costs guidance for non-academic organisations.

Eligible costs for the usage of capital equipment include the cost of equipment only where used in the innovation project for which you have received a loan. If you intend to also use this equipment in other work, the amount of the loan you can borrow towards the equipment will reflect this. The amount of this eligible cost can be borrowed when you need it towards the purchase cost of the equipment.

You will need to fund any project costs that are not considered eligible by Innovate UK. You will also need to cover other day-to-day activities that are not part of the project.

Please note, innovation loans are a form of subsidy. This is because they have favourable terms, such as the discounted rate of interest, which over the life of the loan will be equivalent to a grant.

To comply with UK Subsidy Control and, if appropriate, State aid rules, the level of this ‘grant equivalent’ must fit within the criteria of the competition you are applying into.

Understanding the project and loan periods

The total period for an innovation loan is set out in the brief for the competition you are applying into. This is broken down as:

  1. A period where you can draw down money every three months to carry out your research and development, known as the availability period. The duration of this period will be set out in the competition brief. You will not need to make repayments during this period, but you will need to pay interest every three months on the amount you have borrowed. The rate of interest and how this is paid will be set out in the competition brief. Interest is calculated only on the actual amount you have borrowed, not on the total amount committed in the loan.
  2. A further period to focus on the route to market and commercialisation of your innovation, known as the extension period. The duration of this period will be set out in the competition brief. You won’t be able to make any more drawdowns, and you also won’t need to start repayments during this period. You will need to pay interest during this period. The rate of interest and how this is paid will be set out in the competition brief.
  3. A period to repay your loan, known as the repayment period. The duration of this period will be set out in the competition brief. You will need to make repayments of the total amount you have borrowed, plus any interest deferred during the availability and extension periods. You will also have to pay interest every three months on the amount outstanding. The rate of interest and how this is paid will be set out in the competition brief.

The availability period and the extension period together are considered to be your project. You will need to propose the most suitable timings for your project and business.

The longest periods we will consider in each of these periods and for the overall term of the loan will be set out in the competition brief.

Last updated: 17 August 2021

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