Funding and finance options for innovative businesses

Loans for innovation projects to help small and medium-sized enterprises (SMEs) scale up and grow, focusing on late-stage research and development (R&D) projects with a clear path to commercialisation. £150 million has been approved for continuation of the innovation loans programme over three years post 2022 and they are typically for £100,000 to £2 million.

This programme brings together Innovate UK’s use of grant funding, and investor partners’ aligned funding and expertise.

Its aim is to stimulate research and development in micro, small and medium-sized enterprises, while accelerating equity investment into those companies so that they can grow more rapidly through innovation.

Angel investment is suitable for early-stage businesses with a clear growth strategy and business plan. Business angels will invest their time, money and resources in exchange for a share in your company.

Equity crowdfunding gives you access to a group of investors with diverse backgrounds and experience. Individual investors will apply for a share of your early-stage business.

Grant funding often comes from government agencies, research councils and Growth Hubs. A prime source of grant funding for innovation-focused businesses is Innovate UK.

Grants can provide funding for innovation projects or for specific topics or themes. An R&D grant could help your business develop a new product, process or service and get it to market. Such R&D funding can also support companies to test and de-risk ideas without the requirement for repayment.

Although you will not have to repay the grant, grant funding often comes with specific conditions. If you are applying for grant funding, you will need to understand the eligibility criteria and application process to ensure your innovation project complies.

Discover essential questions to ask before applying for innovation funding.

Growth capital allows your business to accelerate growth by entering new markets, developing new products or investing in technology. This option is suited to growth stage businesses with evidence of year on year growth and may take the form of venture capital or private equity.

Private equity finance is suitable for growth stage businesses with potential for accelerated growth. This medium to long term investment is made in exchange for equity in the business and often involves larger sums of money.

Venture capitalists will invest in your business in return for equity shares to help it grow. This type of finance is suitable for early-stage businesses looking for a flexible option to scale quickly.

Asset finance takes physical assets, such as equipment, as security for lending. This type of lending could work for a growth stage business with assets of value looking for a cash flow injection.

Export finance reduces some of the risk of exporting and trading abroad. Export capital can include bonds, guarantees, letters of credit or working capital loans. An option for UK businesses looking to enter new overseas markets.

An Initial Public Offering (IPO) is when a privately owned business sells shares to the public for the first time. This allows growth stage businesses and scale-ups to raise significant funds.

Peer to Peer lending comes from individuals, businesses and institutions as an alternative to bank loans. Borrowers and lenders are matched via online platforms. Suitable for growth stage businesses looking for quick access to finance whilst retaining control of the business.

Start-up loans can help new and seed stage businesses get set up for trading. This is a personal loan for business owners who have not been able to secure finance from traditional lenders.

Crowdfunding, or reward-based crowdfunding offers rewards in exchange for investment from individuals through online platforms such as Kickstarter. This provides an alternative to debt or equity investment, but it can be difficult to reach your funding target.

A term loan is a lump sum of capital that you pay back at a fixed interest rate.

Trade finance is commonly used for international trade, in which the lender pays for goods which are security for the advance. It can be used to protect against currency fluctuations, political instability and other external factors.