Introduction to Innovation Loans for Business by Innovate UK
Innovate UK (UKRI) ran 5 Innovation Loan Competitions in 2018 targeting Health & Life Science, Infrastructure Systems and Open Innovation (3 rounds). Granted Consultancy have supported clients through the application and project management process for multiple projects over 2018 and here they share some of our insights and learnings to implement into 2019.
Key Learnings about Innovation Loans for Business from Innovate UK in 2018
So, what have we learnt? Here are 5 things we have discovered in advising applicant businesses through successfully securing Innovate UK Innovation loans:
1. Timing - This Innovation Loan funding process is time consuming from the perspective of a business operating in a dynamic commercial setting. Understand that the application will take 6-8 weeks to prepare properly and the decision time frame is at least 12 weeks.
2. Innovation – The first hurdle is the assessment of the innovation of the applicant. Loan assessment will not begin unless and until novelty and capability is demonstrated, so get this bit right or the rest of the effort will have been wasted.
3. Financial Forecasts – Get them prepared by an experienced FD who can generate 5 year forecasts with financial ratios appropriate to a commercial loan. Consider Assets vs. Long Term Liabilities and make sure this ratio is favourable from the perspective of a lender.
4. Scenario Modelling – Consider and model what would happen if sales were delayed, Quick Ratio lapses or key customers fall away. Demonstrate contingency plans and risk management to cope with adverse commercial scenarios.
5. Up-side – This loan has huge benefits – no PG,payment holiday, early draw down, low interest rates and a significant cash injection. Get the application right, treat the Due Diligence process with respect and secure the funding.
Business Innovation Loan Application Process
Compared to Grant Funding Applications, the Innovation Loan Fund demands significantly more information and input from applicants. There are two sections to the application:
1. Part A – Follows an identical process as applying for a grant
a. 10 questions + 4 supporting appendices focused on the R&D project
2. Part B – Additional questions focused on the suitability of an applicant for loan funding
a. 8 questions + 4 supporting appendices focused on the business plan and finances
3. Financial Forecasts
a. Covering the period of the project and loan repayment
Innovation Loan Awarding Process - Innovation Assessment
The loan application for innovation is first assessed on Part A as per the usual grant appraisal process (assessed by 5 independent assessors and scored out of 100 with a threshold success score of 70%). Should the application meet threshold, an email will be sent confirming that the first hurdle has been cleared.
Innovation Loan Awarding Process - Loan Suitability
There then follows a 6-8 week process where the applicant company is assessed for its suitability to receive a loan. It is important to note that IUK Loans do not ask for Personal Guarantees or Fixed Assets to secure the loan against, so expect rigour at this stage. This process will require:
1. A face to face meeting (90mins) with a presentation from the applicant and specific questions on the financial forecasts provided
2. Request for information from IUK Loans team to clarify the position on certain elements of Part B – including commercials,risks, project management, other funding options, scenario modelling and corporate governance
3. Further meeting (or conference call) to discuss the information provided and clarification of any further concerns from the IUK Loans team
4. The credit report will then be finalised (by IUK Loans team) and passed to the IUK Loans Committee for a final decision on whether to award the loan
5. Finally, a presentation to the IUK Loans Committee by the management team of the applicant will be arranged before the loan can be drawn down
Granted Consultancy have experienced bid writers to demonstrate innovation, FD-level financial forecasting capability to prepare professional models and a project management team that understand the DD process. Give your business the best chance of securing Innovation Loans by getting in touch with them at the Business Funding Show ’19 happening on Feb, 21st at East Wintergarden, London. Learn more and secure tickets here.
Written by: Granted Consultancy