Innovation Loans
UK registered micro, small and medium sized businesses (SMEs) can apply for loan funding for innovative late-stage research and development projects with strong commercial potential that will significantly boost the UK economy.
Innovate UK is offering up to £25 million in loans to micro, small and medium-sized enterprises (SMEs)
The Innovate UK Innovation Loans Programme offers loan funding to UK registered micro, small and medium-sized enterprises (SMEs) for innovative late-stage research and development (R&D) projects with strong commercial potential that will significantly boost the UK economy. The programme focuses on businesses that are developing new products, services, or processes with the potential to transform the future economy areas included in the Innovate UK plan for action.
Loans can range from £100,000 to £5 million and are offered on flexible, patient terms for businesses that are beyond the early stages of development but need funding to take their innovations to the next level, helping bridge the gap between research and commercial success.
Who are innovation loans for?
Carrying out late-stage R&D
Businesses with activities required to take a proof of concept or prototype through to commercial application, ultimately delivering new products, processes, technologies and services to market.
‘Scaling’ rather than ‘starting’
Businesses that are scaling up rather than starting out.
Innovative and growth orientated
Businesses who have a clear route to commercial success and economic impact.
Credit constrained
Unable to fund the project from their own resources or other forms of private-sector funding
Impact
Innovation Loans impact from the programme launch in 2017 to 31st January 2025.
£252m
committed
269
borrowers
>£500m
equity raised
5000+
employees
VIDEO GUIDANCE
Innovation Loans resources
Explore the Innovation Loans video resources, including applicant briefing webinars and advice on writing a good application.
Explore video resources
Frequently Asked Questions
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The interest rate is 7.4% per annum (pa). Interest is payable in the project period at 3.7% pa on amounts drawn, with interest at 3.7% pa deferred to the repayment period. Interest is payable in the repayment period at 7.4% pa, together with repayment of amounts drawn and the deferred interest.
We believe that innovation loans will stimulate and support innovation while also providing value-for-money for the taxpayer.
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The funding is available to support late-stage R&D (experimental development) and pre-commercial activities that help exploit the outcomes of that R&D.
Eligible costs include labour, market testing, real-world validation, initial tooling or production scale-up, capital usage, and up to 20% working capital where it supports commercialisation. Loans can cover up to 100% of eligible project costs.
A full summary of the costs that can be included is provided in the Project Finance Guidance. Funding is provided under the UK Subsidy Control Act 2022. Businesses subject to the Windsor Framework which includes companies based in Northern Ireland, may only claim certain project costs. Please visit Costs guidance for non-academic organisations – UKRI.
It is your responsibility to ensure compliance with subsidy control rules.
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We will take security over the assets of the company in the form of a mortgage debenture. The innovation loan does not depend on the value of the assets as security.
Where there is a charge in favour of a senior secured commercial lender (now or in the future), we will expect to be subordinated and cede priority through a deed of priority. Since they can participate in the ‘upside’ of the growth of the business, we do not consider equity holders to be senior secured commercial lenders, so we would expect to have priority over any charge that they may have (for example if there is a secured convertible loan) and would require them to cede priority to us by way of a deed of priority.
- IP / intangible assets do not need to be valued. The debenture is a fixed and floating charge over all assets of the company, without ascribing any particular value.
- We will not require any personal guarantees from founders / directors / shareholders etc.
- We will not take security over personal property.
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You will be required to adhere to some covenants:
- Liquidity Ratio of 1.1x throughout the loan. This means the business’ current assets exceed its current liabilities by 10% and shows the business is able to meet the interest payments in the project period and thereafter meet loan repayments.
- Debt Service Coverage Ratio of 1.2x throughout the repayment period. This shows your earnings before interest, tax, depreciation and amortisation (EBITDA), effectively your free cash flow, will be 1.2X your interest and repayments. The financial Covenants are tested quarterly.
- Project monitoring – This will be through a Project Monitoring Officer. They will make sure that your project is on track and performing well to achieve success at the end of the project.
- Provision of quarterly management accounts
- Provision of annual accounts (within 6 months of year-end)
- Failing to meet the covenants would constitute a breach of the terms of the loan agreement. If not rectified within the period permitted in the loan agreement, this is likely to constitute a default, which might lead to a demand for repayment.
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You must provide historic and forecast financial information so that we can form a judgement about your suitability to take on a loan of the amount and for the period you have requested. We recognise that forecasts will involve judgements and we are interested in the assumptions that you use in your forecasts, as set out in the narrative answers to the survey questions. We want you to be sure that you can demonstrate to your own business (including for example your Board and your shareholders), as well as to us, that a loan is suitable for you.
Downloadable resources




Related Opportunities
Defence Innovation Loans 2025-26
Next cycle closing date: 2 Sep 2025
Loans of up to £1m to help convert your mature defence innovation into a strong business proposition, with a below market interest rate of 7.4% per annum.
More Information
British Business Bank Investment Fund for Northern Ireland
Applications open year-round
The Fund offers two different commercial finance options: loans ranging from £25,000 to £2 million, and equity investments up to £5 million.
More Information
Related Events and Recordings
Wed
16
Jul
2025
Innovation Loans Round 22 - Applicant Briefing Webinar and Deep-dive Workshops
14.00 - 00.30 | Online
Register
For more information
For further information on our Innovation Loans programme please reach out to our experts who are on hand to advise you, or submit your enquiry through our contact form.