Innovate UK innovation loans round 24

Your project

You can apply for a loan of between £100,000 and £5 million to fund your project.

Projects can last up to five years, including both the R&D and pre-commercialisation phases. Projects are expected to start from 1 May 2026. Your exact project start date and first innovation loan drawdown will depend on the timing of the final credit committee decision and completion of loan documentation.

Note: Businesses subject to State Aid Regulations under the Windsor Framework, including those registered in Northern Ireland, are eligible for different funding. Details are provided later in this section.

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.

This competition allows you to include a pre-commercial work package within your project. This will allow you to include some of the new eligible costs that will help you to take your project innovation to market and are over and above typical R&D costs.

New eligible costs that can be included in the pre-commercialisation work package 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.

Note: businesses subject to State Aid Regulations under the Windsor Framework, which includes companies registered in Northern Ireland, will not be able to claim all of the new costs outlined.

You must check the Windsor Framework to check if these rules apply to your organisation. If it does, you will be restricted to the capital usage and material costs for the pre-commercialisation work package.

Eligible Project Costs

Businesses subject to UK Subsidy Control Framework All UK businesses will be able to apply for a loan of up to £5 million.

Eligible costs will include those in GBER Article 25, in addition to:

• labour costs of staff involved in pre-commercial sales and marketing activities to exploit the results of the R&D project
• the full costs of capital equipment used in the exploitation of the results of the R&D project
• the full costs of tooling and materials for development of demonstration or inventory to prove the results of the R&D in a fully commercial setting
• an element of working capital finance in the loan to support cashflow prior to fully profitable exploitation of the results of the R&D project

Businesses subject to State Aid Regulations under the Windsor Framework, including those registered in Northern Ireland.

All UK businesses will be able to apply for a loan of up to £5 million.

Eligible costs will remain within the current framework of those in GBER Article 25, in addition to:

• the full costs of capital equipment used in the exploitation of the results of the R&D project
• the full costs of tooling and materials for development of demonstration or inventory to prove the results of the R&D in a fully commercial setting

A full summary of the costs that can be included is provided in Costs guidance for non-academic organisations.

The new costs that can be included in the pre-commercialisation work package can include:

Labour costs: For staff involved in commercialisation activities to exploit the results of the R&D. The salaries, wages, and related employment expenses for employees who are doing work to prepare for selling, working on activities:

• market research
• customer discovery
• developing marketing strategies
• testing market readiness
• gathering customer feedback
• a new product or service that resulted from research and development (R&D), but before it has been launched in the market

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 Guidance.

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.

Applicants must ensure that all of the proposed work within projects, both that in the UK and internationally, will comply with the UKRI guidance on the use of animals in research and innovation.

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.

Previous applications

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

If you have previously submitted an application that reached our assessment stage, you can re-apply once more with the same proposal.

If there are minor differences to the proposal, but it is judged by us to be ‘not materially different’, the same rule applies.

We will not award you funding if you have:

• failed to exploit a previously funded project
• an overdue independent accountant’s report
• failed to comply with award terms and conditions

Innovate UK may withhold an award payment at any time if you have any outstanding sums due to us in relation to other projects.

Subsidy control (and State aid where applicable)

This competition provides funding in line with the Subsidy Control Act 2022. Further information about the Subsidy requirements can be found within the Subsidy Control Act 2022 (legislation.gov.uk).

Innovate UK is unable to award organisations that are considered to be in financial difficulty. We will conduct financial viability and eligibility tests to confirm this is not the case following the application stage.

EU State aid rules now only apply in limited circumstances. See the Windsor Framework to check if these rules apply to your organisation.

In the ‘Project details’ section of your application you will be asked questions to indicate if State Aid or Subsidy applies to your organisation.

Further Information

If you are unsure about your obligations under the Subsidy Control Act 2022 or the State aid rules, you should take independent legal advice. We are unable to advise on individual eligibility or legal obligations.

You must not do anything which could cause a breach of Subsidy Control legislation applicable in the United Kingdom.

This aims to regulate any advantage granted by a public sector body which threatens to, or distorts competition in the United Kingdom or any other country or countries.

This award is classified as a Subsidy which does not form part of your Minimal Financial Assistance or de minimis allowance.

Funding

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.

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 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, 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.