Data from a recent Freedom of Information request shows that the Innovate UK Innovation Loans team had a £100m budget across 4 competitions in 2025, and only awarded £28.3m in funding to SMEs.
Innovate UK Innovation Loans in 2025
In the post Smart Grant world of 2025, many SMEs were being signposted by Innovate UK Business Connect Advisors to the Innovation Loan Scheme. The offer is attractive:
- £100k to £5m loan
- 3.7% interest
- Repayable over 7 years
- For late stage R&D and pre-commercialisation work
But, towards the end of 2025, rumours were rife that Innovate UK had only awarded one Innovation Loan during the entire year. Whilst we knew this could not be true from successful loan applications we had submitted for our clients, we wanted to know more and submitted a Freedom of Information request. Read on for the data we received from IUK and our analysis of the numbers.
Over the 4 competitions that ran in 2025, the Innovation Loans team received 727 applications, of which:
- 474 applications were ‘in scope’ (meaning conversely that 35% were not assessed at all)
- 304 applications passed the threshold for innovation (and were thus passed to the credit team for further assessment)
- 17 applicants were awarded loan funding (that is a 2.3% overall success rate).
The total funding available in 2025 was set at £100m:
- A total of £28.3m was awarded to applicants (28% of the total fund)
- The average award per applicant was £1.82m (although this was skewed by the 4th round, which had a higher funding limit)
- This left £71.7m of the £100m total fund unspent.
A few more numbers for you:
- Lowest loan amount = £450k
- Highest loan amount = £1.96m
- Average decision time = 167 days
- Average success rate for applicants in scope and who passed the innovation evaluation = 5.9%
Looking beyond the headline numbers
We spend our entire working lives navigating this non-dilutive funding landscape. Here are some insights from our team.
A 5.9% success rate has become normal
Presenting an application that is both ‘in scope’ and ‘innovative’ means you have a 5.9% chance of success. While low, this is not unusual. When it was pulled, IUK Smart Grants had a success rate of under 3%, for example. So, before you apply – make sure your SME and R&D project is in scope and innovative; speak to the IUK Loans team, speak to us.
The underspend per round dropped throughout 2025
The total underspend is indefensible in a climate where funding for innovative SMEs is at an all-time low. The £100m should have been deployed; it would have been if the fund were privately managed. However, if you want to look on the positive side, by the 4th round of the Innovation Loans in 2025, the underspend was at 49%, down from 84% in the first round. This suggests that the lending team were ‘ramping up’ and 2026 should see a much higher allocation of funding. (Why the team needed to ‘ramp up’ after three years into the scheme running, is a different question).
The Decision Time is way too long
SMEs in the fast-paced world of developing novel products, processes and services cannot afford to wait several months for a lending decision. In fairness, by the 4th round, the decision time had dropped to just over 4 months, down from nearly 8 months in the first round of 2025. Does this point to a better 2026? We will be monitoring the data.
Is the Innovate UK Innovation Loan a good R&D funding option in 2026?
In short, if you are confident that your SME is ‘in scope’ and your project meets the requirements to pass the ‘innovation threshold’, then the Innovation Loan should be one of the mix of R&D funding options to consider in 2026. All of our clients’ applications were ‘in scope’ and passed the ‘innovation’ threshold – so if you would like an opinion on your chances of success, contact our team.
Alex Chalkley
I have over 20 years experience in founding and scaling businesses, mainly focused on the non-dilutive funding sector. Since 2008, I have built, trained and mentored teams to successfully draw down over €100m in non-dilutive funding from the UK and EU for clients spanning multiple sectors.
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