02 January 2019

When the then Chancellor, George Osborne, announced plans three years ago to change funding for innovation by small businesses in the UK, his ideas created a raft of challenges for those tasked with making them a reality.

Innovate UK, the government’s innovation agency, had only ever supported businesses with grants, but the shift to providing government backed loans to support innovation close to market meant a whole new way of financing innovative ideas in UK-based micro, small or mediumsized enterprises with innovation projects that want to scale up and grow through innovation.

The goal was to make taxpayer funding work harder and go further, and the government initially put in £50 million for a pilot project to run over several years, during which Innovate UK would make loans of between £100,000 and £1 million to more than 80 UK businesses.

Nigel Walker, Head of Innovation Lending at Innovate UK, says: 'We needed to demonstrate that we could implement innovation loans successfully and getting the fundamental underlying legal framework in place was critical.'

Burges Salmon Corporate team partner Nick Graves recalls meeting with Nigel and his colleagues Tim Sawyer CBE, Chief Investment Officer, and Scott O’Brian, Head of Lending Operations and Risk, to discuss getting the project off the ground. A new company had to be created with the relevant permissions from government to oversee the assessment of applications and make sensible lending decisions.

Nigel says having access to the full weight of Burges Salmon was key to success: 'The challenge was to come up with something completely new that no one in the UK had ever done before,' he says. 'The fact that Burges Salmon has a very good understanding of the public sector context was invaluable and when we spoke to Nick and John Houlden (head of the firm’s Public Sector group), we got access to the whole firm in a way that worked very well for us.'

Applications for loans were then welcomed to finance projects to develop new products, processes or services, or to innovate around existing ones. The focus was on commercialisation, growth and scale-up, with priority given to projects that would lead to growth, productivity gains or access to new overseas markets. For the first time, Innovate UK had to not only identify businesses that would benefit from public funding but also decide whether they would be able to repay the capital on time and pay interest during the life of the loans.

By the end of 2018, nearly all of the loans from the pilot phase were in place. Nigel is pleased that interest came from around the UK. First successful applicants included CitiLogik, G-Volution, Alert Technology, Alcove, Catagen, Utonomy, 3-Sci and Lightfoot.

Innovate UK Loans Ltd has already committed some £30 million in innovation loans. The list of successful applicants now also includes Loowatt, nuron, C-Enterprise, Callaly, The Electrospinning Company, Ashwoods Electric Motors, KwickScreen and Valuechain.com.

The challenge was to come up with something completely new that no one in the UK had ever done before.
Nigel Walker, Head of Innovation Lending at Innovate UK

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