The labyrinth cannot be navigated without skilled advisors
UKBA advisors have been helping technology startups through the labyrinth of the UK government’s ‘Innovate UK’ loan applications.
Some of the UK’s most innovative businesses have been benefiting from a series of government loans and grants that, since 2022, have injected around £100 million a year into product development by UK start ups.
Loan applications are extremely competitive, and are explicitly portrayed as such by the government’s Innovation Funding Service.
Why Smart Loan Funding Is a Major Opportunity for UK Startups
The loans support innovations deemed to have the strongest potential to support future economic growth and tackle social challenges, in realms such as net zero, health and wellbeing, next-generation digital technologies, advanced materials and manufacturing, sensors, quantum computing, robotics and smart machines.
What Makes Innovate UK’s Process So Challenging
UKBA advisors have been helping young technology businesses secure loans of up to £2m each. It’s a very exacting process which our SMEs need help with. Clients’ first question is typically ‘can you guarantee me success?’, to which the answer is, regrettably, a short one. The time scales are aggressive, with four competition ‘rounds’ per year. Even with an advisor on board, it’s a rush from the opening of each quarterly competition to the closing date.
Why Expert Advisors Give Applicants a Real Edge
The gov.uk application portal is daunting and, as many will expect, not user-friendly. Success rates are low, but it can be a very rewarding process and right now there are a few UKBA clients waiting to see if they’ve been successful.
It’s a great opportunity for UKBA advisors to prove themselves. They get referenced on the application, and noticed by Innovate UK, who also act as mentors as well as loan competition judges. Part of the knack for the financial part of these applications is to demonstrate on the one hand that the product is viable, but on the other hand that without this funding, the product will not be ready for market. The other part of the balancing act is to show that other sources of finance, including seed equity, are present, but not in sufficient amounts for the product to get to market…and that the presence of Innovate UK funding will be a key proof point to attract follow up equity funding.
Balancing the Financials: What Innovate UK Expects
The financial modelling is not simple. The application requires multi-year profit and loss, balance sheet and cash flow projections, and if these all do not reconcile, the application is thrown out automatically. That’s pressure! But the upside is that if you can deliver, the client would likely want to include you on future projects.
A couple of key additional criteria are, firstly, to save UK taxpayers’ money, and, secondly, to contribute to health, environmental or financial resilience, particularly for vulnerable groups. Advisors can help clients to take a step back from their product development concerns in order to consider these impacts
Beyond the Application: Building on Success
And it leads to follow-up work. With one of my clients, a maker of optical sensors, Innovate UK is emphatic about not wanting to be the only provider of funding, so this client now needs quick help in getting straight on to finding additional funding to complement what Innovate UK will offer. Diligent work by advisors has led, even before knowing if we have succeeded, to clients recommending us to other businesses pursuing Innovation UK loans.
How UKBA Advisors Can Collaborate and Add Value
It’s also a perfect opportunity to involve other UKBA advisors with specialist expertise. The Innovate UK application process asks about product, technology, management, leadership, finance, marketing, equipment costs, value for money, market share, market growth and on and on. No single advisor can cover all of that ground.
Structuring Fees Fairly: Balancing Risk and Reward
Of course, applicants for these loans, by definition, don’t have much money for advice. A fixed fee is fair in view of the work involved and the evident visibility of what a good job in completing the application looks like. But if you’re up for some risk you could agree, in addition, a small percentage of funds raised – and then it can be up to you where you place the trade-off between a fixed reward and an option on success.