Area of investment and support

Area of investment and support: Innovation loans for late-stage research and development

Innovation loans are for micro, small and medium-sized enterprises that want to scale up by developing new or improved products, processes or services through late-stage research and development projects.

The loans aim to provide flexible and patient capital to support business growth through all stages of innovation.

Budget:
£150 million over three years
Duration:
This is an ongoing programme running between 2022 and 2024
Partners involved:
Innovate UK

The scope and what we're doing

Innovation loans are there to help businesses overcome barriers to their innovations becoming a successful, commercial reality. The aim is to make a considerable economic impact which results in significant, sustainable business growth. The loans aim to provide flexible and patient capital to support business growth through all stages of innovation:

  • late-stage research and development
  • clear route to commercial success
  • innovative and growth orientated
  • ‘scaling’ rather than ‘starting’
  • credit constrained.

Innovate UK is looking for businesses who can demonstrate that their projects have the best potential for the future and across a variety of technologies and markets, with a particular focus on future economy areas set out in the Innovate UK action plan for business innovation 2021 to 2025.

Future economy areas

The future economy areas are as follows:

  • net zero, including:
    • energy
    • impact of industrial processes and use of materials
    • agriculture and food and other sources of emissions
    • capital intensity
  • health and wellbeing, including:
    • tackling ill health
    • enhancing wellbeing
    • diet and food
  • next generation digital technologies
  • technology families, including:
    • advanced materials and manufacturing
    • artificial intelligence
    • digital and advanced computing
    • bioinformatics and genomics
    • engineering biology
    • electronics, photonics and quantum technologies
    • energy and environment technologies
    • robotics and smart machines.

Funding available

The funding details are as follows:

  • innovation loan size: £100,000 to £2 million
  • to fund up to 100% of eligible research and development project costs
  • up to seven year flexible and patient repayment term
  • 7.4% interest rate (partial deferral during project period).

Why we're doing it

We are running this programme to:

  • encourage businesses to undertake and complete their research and development activities
  • support their commercial success and growth at scale
  • provide flexible and patient funding for innovative micro, small and medium enterprises, which is not always available
  • improve value for money for the taxpayer through repayable forms of finance.

See the Innovate UK action plan for business innovation 2021 to 2025.

Opportunities, support and resources available

Past projects, outcomes and impact

Innovation loans started as a pilot in 2017 and became a business as usual programme for Innovate UK in 2022.

Innovate UK commissioned SQW, working with IFF Research and Middlesex University London, to conduct an interim evaluation of the pilot in 2019, with a follow-on report in 2021.

Read the innovation loans follow-on interim report.

This interim evaluation found the pilot to have been highly successful and reported that the innovation loans programme is viewed as a key finance product in the market.

It complements other finance products and provides beneficiaries with access to funding that would not be available elsewhere.

This interim innovation loans evaluation has indicated that the programme is making good progress towards delivering economic impacts. The loans have been essential for commercialisation of new or improved ideas, and these companies are experiencing positive effects on employment, sales and turnover.

We are now moving forward with our Innovation Loans competitions with a focus on the future economy and the areas of net zero, health and wellbeing, next generation digital technologies and technology families as outlined in Innovate UK’s plan for action.

As at the end of December 2021:

  • £163 million has been committed, of which £129 million has been drawn down
  • there have been 191 borrowers to whom we have committed 208 loans. Overall, we have received over 1,000 applications
  • we have had £7 million of these loans repaid early
  • of 191 borrowers, 58 have leveraged private investment totalling £110 million, which is 33% of our portfolio and an average raise of £1.8 million.

Regional exposure

Not surprisingly, we have a high proportion of loans extended in London and the south east, but we do receive a higher volume of applications from these areas. We are looking at ways we can increase applications from those underrepresented regions.

Sectors

Over 70% of our portfolio are within manufacturing and digital or software and technology. We need to consider a more balanced portfolio, so once again we are looking at ways of increasing exposure in many of the other sectors.

Early impacts

The pilot programme evaluation showed that:

  • the loan directly increased investment in research and development
  • 92% of firms had progressed their new product or service towards commercialisation
  • 72% had applied for intellectual property (IP) protection or expected to do so in the future
  • 60% had launched new products, services or processes with a value of circa £28 million
  • 58% of businesses had secured follow-on funding since receiving the innovation loan
  • 84% of firms reported an increase in employee numbers (346 additional jobs)
  • there was a £44.7 million additional turnover since innovation loans were launched.

Case studies

CATAGEN

Net zero technologies company CATAGEN is based in Belfast.

CATAGEN has received two loans totalling £2.6 million in the innovation loans pilot in 2018 and in the innovation continuity loans programme in 2020.

CATAGEN delivers advanced solutions that have a direct impact on our cities and air quality.

Reducing tailpipe emissions remains one of the biggest challenges facing the global mobility industry.

CATAGEN is currently using its specialist emissions expertise to develop new technologies in green hydrogen and e-fuel to impact net zero and climate change targets.

Dr Andrew Woods, Founder and CEO, said, “the loans from Innovate UK have provided vital support to us to develop our technology and reach new markets, enabling us to further our purpose, which is to clean and decarbonise the air.”

The former Secretary of State for the Department for Business, Energy and Industrial Strategy (BEIS), Rt Hon Kwasi Kwarteng opened the CATAGEN Net Zero Technologies Centre in Belfast’s Titanic Quarter in late 2021, saying, “I can think of no other SME that captures what we’re trying to do in BEIS: enterprise, net zero and innovation. CATAGEN, here in Belfast combines all three extremely effectively… the technologies they develop can help to create jobs too, demonstrating that going green and driving growth go hand in hand.”

The Electrospinning Company Ltd

Since receiving a £714,000 innovation loan in late 2018, The Electrospinning Company Ltd has been scaling the manufacturing processes for its nanofibrous biomaterials for use in tissue regenerative devices.

The Electrospinning Company was a spin-out from the Science and Technology Facilities Council (STFC), part of UK Research and Innovation. It is located in a purpose-built cleanroom facility in the Harwell Campus in Oxfordshire.

The company has also made use of the Innovate UK EDGE programme’s support at this important growth inflection point in their journey towards scale.

Since taking on their innovation loan, the company has raised investment in:

  • a £1.5 million series A round led by Downing
  • a £4.5 million round led by strategic investor Confluent Medical Technologies Inc.

Experienced CEO, Ann Kramer, highlighted the importance of the innovation loan, saying: “this loan enabled us to purchase equipment and deliver manufacturing process innovation and validation for our scalable manufacture of implantable biomaterials that work with patient cells to repair or regenerate tissues. The innovation loan was pivotal in putting our investment round together and helping us to shift from slow-growth angel funding to rapid-growth venture capital and strategic investor funding.”

Invatech Health Ltd

Invatech Health Ltd is based in Bristol.

It has used an innovation loan and an innovation continuity loan, together totalling £1.8 million, to develop Titan PMR, its fully NHS accredited Pharmacy PMR system.

This disruptive technology fundamentally changes the way that pharmacies work, creating new efficiencies and delivering a platform that opens up new possibilities for the future of the industry.

In a relatively short space of time, Titan has gone from prototype to a fully commercial product that is transforming the pharmacy landscape.

Its unique processes have helped free up 50% of pharmacists’ time and improved dispensing safety by 95%.

The innovations, including the first artificial intelligence system for pharmacy, are changing the way pharmacy is practiced.

Titan’s appeal in the market is also translating into a commercial success story.

The business is generating solid recurring revenues which are increasing month on month as the volumes grow.

The commercial models established during this journey are as innovative for the market as the product itself.

The CEO Tariq Muhammad says:

Our promise was to disrupt the pharmacy market and I believe we have achieved this objective. Without your support and faith, Titan would still be at an early developmental stage without the necessary funds to gain momentum.

Who to contact

Customer support service

Email: support@iuk.ukri.org

Phone: 0300 321 4357

Last updated: 30 September 2022

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